DISCLOSURE OF DIRECTOR'S INTEREST- THE COMPANIES ACT PERSPECTIVE

In Companies Act, 2013, two types of disclosures of interest or concerned are prescribed under Section 184.

1). Disclosure of Interest or Concerned by director under Section 184(1); &

2). Disclosures of Interest by director under Section 184(2).

Disclosure of Interest or Concerned by director under Section 184(1):

Section 184(1) deals with the disclosure, requirements by each Director, to made at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, in such manner in Form MBP 1.

Disclosure of Interest or Concerned by director under Section 184(2)

In compliance with Section 184(2) of the Companies Act, 2013, disclosure of interest by every director who is in any way concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into with a body corporate in which such director, whether single or along with other directors-

• holds more than two per cent. shareholding of that body corporate ; or 
• is a promoter, manager, Chief Executive Officer of that body corporate. 

The Director shall also disclose his/her concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered with a firm or other entity in which, such director is a partner, owner or member shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed.

Comparison of Disclosure of interest under Section 184(1) & (2)

Disclosures require under Section 184(1), are mandatory irrespective of shareholding like holding of more than two per cent. On the other side, Section 184(2) seeks disclosure when Director exceeds the limit or fall under any criteria as mentioned above at any time during his directorship.

Under section 184(1), disclosures are not based on any event except when changes in the disclosure already made but under Section 184(2),disclosures are mandatory only when company has entered into or proposed to be entered in any contract or arrangement with other body corporate or firm in which any of the criteria’s as mentioned above is meeting.

The disclosure as requires under section 184 (1) & (2) of the Companies Act, 2013 read with Rule 9 of the Companies (Meetings of Board and its Power) Rule, 2014, shall be made in Form- MBP-1

IMPACT OF DISCLOSURES UNDER OTHER PROVISIONS:-

In Compliance with Section 188 of the Companies Act, 2013 read with Rule 15 of The Companies (Meetings of Board and its Powers) Rules, 2014, a Company shall enter into any contract or arrangement with a related party subject to passing a Board Resolution shall contains prescribed information’s as mentioned below in the agenda of that Board meeting at which the resolution is proposed to be moved.

In Compliance with Section 189 (1) of the Companies Act, 2013, every company shall keep one or more registers giving separately the particulars of all contracts or arrangements to which sub-section (2) of section 184 (as mentioned above) or section 188 (related party transactions) applies and after entering the particulars such register or registers shall be placed before the next meeting of the Board and signed by all the directors present at the meeting.

Applicability of above Compliance:-

No requirement to enter such details in the Register of contracts or arrangements in which directors are Interested, in case of any contract or arrangement for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed five lakh rupees in the aggregate in any year.

Applicable Provisions:-

• Section 184(1) & (2) of the Companies Act, 2013;
• Section 188 of the Companies Act, 2013; & 
• Section 189 of the Companies Act, 2013.
• Rule 9 of the Companies (Meetings of Board and its Power) Rule, 2014. 

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