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:
- Name of Company/ body corporate/ firm/ Association
- Nature of Interest/ concern/ change in interest or concern
- Date on which interest/ concern changed.
This seems simple but at the time of transition in law, this is not.
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.
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.
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,
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