DISCLOSURE OF INTEREST


Recently this blog received many queries regarding provisions relating to disclosure of interest under Section 184 and rules made there under including form prescribed in these Rules.

We have discussed Section 184 here earlier. Every director shall disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholdings, in such manner as may be prescribed. Such disclosure shall be made on three particular point of time:

(i)           At the first meeting of the Board in which he participates as a director;

(ii)          At the first meeting of the Board in every financial year; and

(iii)         Whenever there is any change in the disclosures already made, then at the first Board meeting held after such change.

Rule 9 of the Companies (Meeting of Board and its Powers) Rules 2014, read as under:

(1) Every director shall disclose his concern or interest in any company or companies or bodies corporate (including shareholdings interest), firms or other association of individuals, by giving a notice in writing in Form MBP – 1.

(2) It shall be the duty of the director giving notice of interest to cause it to be disclosed at the meeting held immediately after the date of the notice.

(3) 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.

The Form MBP – 1ask following details:

  1. Name of Company/ body corporate/ firm/ Association
  2. Nature of Interest/ concern/ change in interest or concern
  3. shareholdings
  4. Date on which interest/ concern changed.

This seems simple but at the time of transition in law, this is not.

Discussion 1:

Sub – section (5) of Section 184 define this term “interest applied for purpose of contract or arrangement but not for disclosure” for the purpose of this section. This sub – section say, “Nothing in this Section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent of the paid-up share capital in the other company.

Disclosure under sub – section (1) of Section 184 is a universal and annual application. Sub – section talk about a prescribed format and Form MBP – 1 is that format.

Disclosure under sub – section (2) of Section 184 is specific disclosure to be made to the Board in its meeting where contract or arrangement is being discussed or when a director become interested after entering into contract or arrangement and a board meeting held.

We have already discussed this sub – section (2) of Section 184 earlier here.

Discussion 2:

What is relevant date for disclosure in Form MBP – 1. The disclosure shall be made in first board meeting of a financial year at first place. This means if first board meeting is scheduled on 1st day of April of a year, all directors shall disclose their interests on 1st April in the Board meeting.

There is one question, whether disclosure of interest made on 31st day of March 2014 is valid under law?

According to the Notification issued by Ministry of Corporate Affairs on date 26th March 2014, Section 184 come into force on 1st April 2014. Any disclosure made before commencement of force of Section 184, I am afraid, is not be valid and be valid only if such disclosure under Section 184 is made on or after 1st day of April 2014.

Any disclosure made on or before 31st day of March 2014 must have been made under the requirement of earlier provisions of Companies Act, 1956 and any default therein may be violation of that Act.

 

Discussion 3:

Form MBP – 1 is basis of quorum for Board discussion on any contract and arrangement. This shall be kept in record of the company. This also become important document for explanatory statement for a motion for a special resolution related to contract and arrangement and may be referred therein. There is no legal requirement to file Form MBP – 1 with Registrar of Company.

[UPDATE: With careful study many time, I am now of the opinion that, this form should be filed with concern ROC in Form MGT – 14 when such disclosure by a director and Board take note of such disclosure. The Board is required to take note of disclosure by way of resolution. The resolution shall be filed along with this Form MBP – 1 as annexure.
However, this Rule may result in routine filing of form MGT – 14 and may cause hardship.
Aishwarya Mohan Gahrana, date 14 July 2014]

The company may otherwise deals with Form MBP – 1 as per Secretarial Standards, Listing Requirement and/ of transparency policy and disclosure norms adopted by the company,

 

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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42 responses to “DISCLOSURE OF INTEREST

  1. Pingback: Index of Companies Law Posts | AishMGhrana

  2. Thank you very much for your valuable article sir.My query is regarding the extent of disclosure a director means foreign companies also including or only indian companies are considering for Disclosure of Interest ……….? If Foreign companies accept in this regard which section and rule …………kindly resolve my query……….?

    thanking you

    Like

  3. CA KOUSHIK MUKHESH

    Sir, i surely agree with your articles.
    many doubts are there regarding applicabilty of exemption u/s 184 sub section 5.
    section 184 ss 1 disclosure is a mandatory disclosure whether or not company enters into a contract or arrangement
    thanks for a great article….

    I have a doubt in this regard.
    it is…
    when a director becomes so concerned or interested after contract was entered… how to disclose???
    by way of general notice or specific disclosure.
    im confused because proviso didnt use the word NATURE …
    nature of concern is to be disclosed under spefic disclosure
    clarify my doubt
    thanks in advance

    Like

  4. Dear respected seniors

    My queries is that in DIR-8 mentioned about disclosure of interest in last three year. but what is means by last three year i.e. financial year or calendar year to be counted ?????

    Pl suggest me

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  5. My queries is that in MBP-1 which date is mentioned i.e. date of original appointment of director OR change in directorship from director to managing director
    Pl suggest me
    and also tell me which date is mentioned in DIR-8 about date of appointment which date is mentioned original date of appointment or date of change in designation

    Pl suggest me

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  6. Sir if a pvt ltd co. is formed in September 2014 and another pvt ltd co. is formed in October 2014 and the directors of both the companies are same, then is it mandatory to file MGT 14 for MBP 1 with respect to the disclosure of interest of the directors after the incorporation? Or is it okay if the same is filed after the first board meeting of the Financial starting April 2015?

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  7. Thank you very much for your valuable article sir.My query is regarding the extent of disclosure a director is required to make regarding its shareholding in different companies..I mean if a Director Mr X is a member of 500 companies and half of these shareholding form more than 2% of the company’s shares and rest are below 2%. So my question ; do the director needs to disclose about the shares held by him in all the 500 companies(which is practically quite difficult) or only those which form his 2 % of total paid up capital of the company..Plz guide..

    Like

    • Should I buy this argument?
      No, I do not buy.
      If director may maintain such a huge portfolio, Director may disclose without any difficulty. No practical difficulty at all.

      Director may please disclose all interests as per intention of law.

      Like

      • For a active trader in stocks and shares, the portfolio is never constant. So does this mean that every time there is a change in portfolio, a director of the company should intimate the company through form MBP – 1?
        Change in portfolio need not necessarily mean exiting or investing in shares of a company. It could also mean changing the size of the shareholding in a company.
        And then there will be a pile of such forms from a director, which will be taken note of in a board meeting ?

        Like

  8. if a company comes under the definition of small company as per the companies act 2013. Now according to the new rules they had to conduct board meeting in each half of calender year and the time gap should be more than 90 days between two meetings. if they already had a board meting on 20 March 2013, now the next meeting can be only after 20 june. now if company hold the board meeting on 12 august than the last date for fiing mbp1 will be 12 september???
    will company had to pay any additional fees regarding it??

    Like

    • “Section 173(5) A One Person Company, small company and dormant company shall be deemed to
      have complied with the provisions of this section if
      *at least one meeting of the Board of
      Directors has been conducted in each half of a calendar year and
      **the gap between the two meetings is not less than ninety days.”

      May you read again with me.

      Like

  9. director is trustee of a trust..?? do we need to include the same in mbp-1..??

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  10. if a director does not have any interest will he give MBP- 1 in the first Board Meeting???

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  11. Directors dont have interest in any companies & firms.It is Mandatory for a company to file the MGT-14

    Like

  12. sir,
    My comapny is incorporated under comapnies act 1956 and i had to disclose intrerest of director in the board meeting. Mgt 14 should be filed within how many days?

    Like

  13. Dear sir,
    company incorporated under comapnies act 2013 and Mr x is a director and he is not holding directorship in any other company..is MGT-14 Is to be filed? if yes then what will be the attachment?

    Like

  14. Sandeep Gandhi

    The Director resigned from one company. There is any change in the disclosures already made by director. Whether Director has to intimate to other companies change(s) in MBP 1 form OR simple letter disclosing changes will suffice?

    Other Companies take note of the disclosure of director’s interest. (new declaration after resignation). Whether MGT 14 form require to be filed?

    Like

  15. A person is a director in 1 company only and hold more than 2% of the share capital of that company. Should the director give the notice in MBP 1 and should MGT 14 be filed? Or should the interest in “other” companies only be given

    Like

  16. Directors interest to be disclosed in MBP1 will include proprietorship or not?
    In MBP1 only Company, body corporate , firms or other association of Individuals is mentioned

    Like

  17. Directors interest to be disclosed in MBP1 will include proprietorship or not?

    Like

  18. do we need to disclose relative as any transaction with them will be interest party

    Like

  19. Dear Sir
    If director hold more than 21% share in Public co. or private co. is this required to disclose in MBP- 1 by director or Not….(in both cases)

    Like

  20. Equity and Preference shares can both are disclose in MBP-1 Form

    Like

  21. Does the Director needs to give information on all the shares he hold or is it limited to shareholding of any companies where he is a Director or officer.
    Meaning if I have shares for investment and I am director then do i need to discolse all that details of share that i have which are meant solely for investment / trading purpose although I am in now way related to the company as Director / Officer / Employee etc

    Like

  22. Varsha Agrawal

    Sir, if in any company there is only two directors and one died before March,14. Now company is having only one director. I want to know about the appointment of new director and upto which date first board meeting should be held so that old director and new director can disclose there MBP-1

    Like

  23. Varsha Agrawal

    Does MBP-1 is required to file as an attachment of MGT-14 FORM?

    Like

  24. The Director holding directorship in 10 companies. Resigned from one company. Intimate his resignation to other nine companies. Shall all nine companies are require to file form when disclosure recorded in minutes?

    Like

  25. Dear Sir,

    Thanks for the updation.

    I have a query, as mentioned by you under discussion 3 that “There is no legal requirement to file Form MBP – 1 with Registrar of Company.”

    I request your good self to please refer section 117 (3) (g), 179 (3) (k) & Chapter 12 of Rules ” Power of Board” point 8 (5)

    Under the rules in which it has been mentioned that the board has to take note of the disclosure of directors interest & shareholdings. Do he have to mention all the details provided by the directors or we just have to take and note that we have received the declarations for the current financial year.

    Thanks & Regards
    Nitish

    Like

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