CS Kiran Kumar Bodla
What are the Provisions applicable?
Section 167(1)(c) & (d)
Section 173(1) and (5) Meetings of Board
Section 117 and 179(3)(k) r/w Rule 8(5)
Section 184 & Rule 9
Section 188, Sec 189(2) & (6) & Rule 16
What to Disclose?
Any concern or interest, including the shareholding, in any company or companies or bodies corporate, firms, or other association of individuals.
Who shall disclose?
When to Disclose?
1) at the first meeting of the Board in which he participates(either in person or through video conferencing or other audio visual means, as prescribed) as a director. However, sec 189(2) requires every director within a period of thirty days of his appointment, or relinquishment of his office, as the case may be, disclose to the company his concern or interest,
2) at the first meeting of the Board in every financial year,
3) at the first Board meeting held after any change in the disclosures already made, and
4) who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into interest at the meeting of the Board in which the contract or arrangement is discussed —
5) who is not so concerned or interested at the time of entering into a contract or arrangement, he shall, if he becomes concerned or interested after the contract or arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or interested or at the first meeting of the Board held after he becomes so concerned or interested.
Key managerial personnel
Every key managerial personnel shall, within a period of thirty days of his appointment, or relinquishment of his office, as the case may be, disclose to the company his concern or interest.[Sec 189(2)]
What is prescribed form to disclose the interest?
Whether a director has to disclose his interest in foreign companies as well?
Yes, Body corporate includes a company incorporated outside India.
When to have the first meeting of the Board in a financial year?
As the new Act does not require holding of Board meeting once in every three calendar months; if the financial year commences from 1st April, 2014:
What is the duty of the director after giving notice/disclosure of interest by Directors?
What shall be the quorum in the cases of having interested directors?
The quorum for a meeting of the Board of Directors of a company shall be 1/3rd of its total strength or two directors, whichever is higher. Where at any time the number of interested directors exceeds or is equal to 2/3rd of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.
What is the duty of the Board of directors of a company?
The Board has to take note of the disclosure of director’s interest and shareholding by way of a resolution passed at its meeting and causes such resolution to be filed with the Registrar of companies in form MGT-14 within thirty days of passing the resolution.
How about the Custody & Preservation of notices of interest?
All notices shall be kept at the registered office and such notices shall be preserved for a period of eight years from the end of the financial year to which it relates and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose.
Is it required to disclose the shareholding in a company in form MBP-1, even if it is 2% or less?
Yes, as per Sec 184(1) shareholding of a director has to be disclosed irrespective of percentage.
However, disclosure of nature of concern or interest at the meeting of the Board in which any contract or arrangement is discussed is not required, if holds not more than 2% of paid up share capital in such other company.
Is it required to maintain any Register?
Every company has to keep one or more registers giving separately the particulars of all contracts or arrangements to which sec 184(2) or 188 applies, in form MBP-4.[Sec 189 & Rule 16]
What are the Consequences of Contravention?
What are the Issues of concern for companies?
As the text of Sec 184(1) & (2) requires disclosure of interest by every director in case of contracts/arrangement in which they are interested and any change in their earlier disclosures, and Sec 117 r/w 179(3) and rule 8 requires filing of form MGT-14, which leads to multiple instances of filing such form and becomes financial burden on companies.
What is to be disclosed/specified in Statement to be annexed to notice calling general meeting?
A Statement to be annexed to notice calling general meeting concerning each item of special business to be transacted therein shall contain the nature of concern or interest, financial or otherwise, if any, in respect of each items of
(i) every director and the manager, if any,
(ii) every other key managerial personnel, and
(iii) relatives of the persons mentioned in sub-clauses (i) and (ii).
Disclaimer: The above views are the personal views of the author and the Readers are requested to exercise their due diligence before taking action.
( CS Kiran Kumar Bodla B.B.A., ACS, LL.B., BK & Associates, Company Secretaries, E-mail: email@example.com)