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

Section 403

Rule- the Companies (Meetings of Board and its Powers) Rules, 2014.

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?

  • Directors
  • Key managerial personnel

When to Disclose?

Every director

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 —

  1. with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or
  2. with a firm or other entity in which, such director is a partner, owner or member, as the case may be.

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?

Form MBP-1.

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:

  • A One Person Company (having more thanone director on its Board), small company and dormant company can hold its first meeting of the Board in the financial year 2014-15 in the second half of a calendar year (July-December). However, as the company has to conduct the AGM within 6 months form the closure of financial year, pre-AGM Board meeting has to be planned accordingly as it may be the first Board meeting in financial year.
  • Every other company (other than a small/dormant company) can hold its first meeting of the Board in the financial year 2014-15 within 120 days from the previous Board meeting. If a company holds’ a Board meeting on 31st March, 2014 it can hold its next meeting i.e. first meeting of the Board on or before 27th July, 2014.

What is the duty of the director after giving notice/disclosure of interest by Directors?

  • It shall be the duty of the director giving notice of interest in form MBP-1 to cause it to be disclosed at the meeting held immediately after the date of the notice.
  • A director shall not participate in a meeting where he disclosed the nature of his concern or interest at which a contract or arrangement where in any way, whether directly or indirectly, concerned or interested in such contract or arrangement.

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?

  • A director who contravenes the provisions of Sec 184 shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than Rs.50,000/- but which may extend to Rs.1,00,000/-, or with both.
  • A director has to vacate his office, if he fails to disclose his interest or acts in contravention of the provisions of Sec 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested.
  • A contract or arrangement which is entered into by the company without disclosure or with participation by a director who is concerned or interested shall be voidable at the option of the company.
  • Where filing form MGT-14 is not done within the time specified (i.e.30 days), it can be filed with an additional fee up to 270 days.

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: mail_bka@yahoo.com)

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  1. Waishnav Bute says:

    Can a small company, if missed, file DIR-8 and MBP-1 in 2nd financial year? Also if there is no change in interest, is it necessary to file every year?

  2. meenu says:

    i want to know that is mbp 1 to be given by CS of Private Company. As per Section 189(2), KMP has to disclose his interest but Private Company needs not to have KMP but in the definition of KMP Company Secretary is included and if Private Company has CS and not KMP> so, MBP 1 is to be taken from CS or not

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February 2024