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    MBP 1 at the Time of Incorporation ?

    Posted By : SHALU / Published on : 15-Jun-2022 06:21 AM / View : 97 / Comment : 1
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    Hi all

    Does MBP -1 need to be filed at the time of incorporation (SPICE plus form) if one of the directors is a partner in a LLP?

    What exactly needs to be done? The attachment asks for the Interest of first directors in other entities.

    Will appreciate a quick reply as the matter is urgent
    Read more on : incorporation time

    • Learn First what is MBP 1 -
       

      Section 184 (1) regarding disclosure of concern or interest by the Director has invoked considerable controversy. I have gone through the provisions of section 184 of the Companies Act 2013 in deep and noted certain facts. So an attempt has been made from my side to discuss critical aspects and various issues w.r.t. the compliance of section-184 (1).

      I hope the write up below would be of some help to understand the provisions regarding disclosure of concern or interest by the Director.

      Analysis of Section 184 (1) regarding Disclosure of Interest

      Section 184 is about 2 separate disclosures. One is under section 184(1) and second is under section 184(2).

      General Disclosure u/s 184(1): Let us discuss General Notice of disclosure of concern or interest by the Director under section 184(1).

      As per section 184(1) of Companies Act, Every director shall:

      • 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
      • henever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding, in such manner as may be prescribed. [Rule 9 of Companies (Meetings of Board and its powers) Rules, 2014].

       

       Method of General Notice of Interest (Form MBP-1)

      As per section 184(1) read with rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014, Every director shall disclose his concern or interest in any company or companies or bodies corporate (including shareholding interest), firms or other association of individuals, by giving a notice in writing in Form No. MBP-1.

       

      MAIN ISSUE IN MBP-1- Disclosure of Interest in case of small shareholding

      As per my understanding even if Director holds 1 share of any company he has to disclose the same through MBP.1 keeping in view straight language of Section 184(1). It is well established fact that disclosure of interest on the part of director includes disclosure of direct as well as indirect interest.

      Further, exception created by Section 184(5)(b) does not affect the general nature of Interest to be disclosed in the beginning of the financial year under sub section (1). Members who think if shareholding is less than 2%, then no general disclosure u/s 184(1) would be required are misinterpreting the provision. In simple words there is no exemption from the compliance of section 184 (1). Section 184(1) is an independent section and simply talks about shareholding interest without putting any limit.

      Questions arises while interpretation of section 184(1) –

      Q1: If a Director has shares of a No. of companies say about 100 companies, does he require to disclose about all the companies in MBP-1?

      Q2: What will be the case, if suppose the director is not holding any shares in a particular company but only his relatives are having the shareholding in that particular company, Do we still need to disclose the same in MBP 1?

      Conclusion:

      As per Sec 184(1), it says that the directors need to disclose its nature of interest in any co / bodies corporate, firms or other associates WHICH SHALL INCLUDE SHAREHOLDING. Section 184(1) does not have any criteria with respect to percentage of shareholding. But if we see 184(2), it says that if any director is ENTERING into any CONTRACT with any body corporate in which he along with other directors holds >2% of the shareholding. 

      In 184(2), criteria for percentage of shareholding has been mentioned, which is >2%. So, I feel directors need to disclose even if their shareholding is less than 2%. Only when they are entering into any contract or arrangement with any body corporate, they need to disclose their interest if their shareholding exceeds 2%

      Section 184(1) is undoubtedly open for interpretation. It is unclear about mentioning of Shareholding interest of directors in Form MBP-1. I suggest that we must comply the provisions of Section 184(1) with full letter and spirit by mentioning each shareholding of director in any company in which he is a shareholder until some amendments clarify this issue.

      27-07-2022 / 07:52:26 AM
      Reply



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