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    Query related to Section 184 of the companies act, 2013

    Posted By : SARIKA / Published on : 23-Jul-2022 03:02 PM / View : 103 / Comment : 1

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    1. Section 184(1) - Should foreign directors disclose their interest or concern in entities that are located elsewhere except India?

    2. Section 184(2) - Does the wording "shall not participate in the meeting" mean to not participate in the entire meeting or only for that respective agenda?

    Please clarify
    Read more on : companies section related query

    • As per Section 184(1) of the Companies Act, 2013 read with rule 9(1) of the Companies (Meeting of Board and its Powers) Rules, 2014 states that every Director shall disclose his concern or interest in any company or companies or bodies corporate (including shareholding interest), by giving a notice in Form MBP-1.

      Section 2(11) of the Companies Act, 2013 reads that a body corporate includes a company incorporated outside India. Hence, in consonance with the said provisions it may be concluded that a director is required to disclose his interest as regards holding directorships or shareholding interest in foreign companies to the Board of Directors in their meeting.

      Here Every Director Including Foreign Director etc.

      If we read As per sub-section (1) of the section 184 of the Companies Act, 2013, read with rule 9(1) of the Companies (Meetings of Board and its Powers) Rules, 2014, 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 whenever 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 Form MBP-1.

      further As per sub-section (2) of section 184 of the Companies Act, 2013, every director of a company 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 with a body corporate in which such director or such director in association with any other director, holds more than 2% shareholding of that body corporate, or is a promoter, manager, CEO of that body corporate or with a firm or other entity in which, such director is a partner, owner or member, as the case may be, shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.

      Such meeting here means "In that whole meeting"

      However, after the MCA Exemption Notification dated 5th June, 2015, in case of private company, section 184(2) shall apply; with the exception that the interested director may participate in such meeting after disclosure of his interest.

      Thus, from the above it may be concluded that disclosure in respect of shares of any amount shall be given in Form MBP-1 and in case of a contract or arrangement the director holding more than two percent of shareholding is required to give such disclosure. Further, only a director of a private company can participate in such meeting where he is interested after the disclosure of his interest. It may be pertinent to note the prescribed Form MBP-1 for disclosure in this regard has a column to disclose shareholding details.

      It may be noted that exemption is only with respect to section 184 and not section 188, i.e., in case of a related party transaction where the director is a related party then the director concerned will not be counted for quorum and shall not participate.

      23-07-2022 / 03:52:52 PM
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