How and why to disclose director’s interest to Registrar of companies – Companies act 2013

New companies act 2013 has introduced so many new compliance which every private and public limited company registered with registrar of companies are required to comply with. One of such requirement is related to disclosure of director’s interest to registrar of companies or ROC.

Provisions related to disclosure of director’s interest are specified in section 184(1) of Companies act 2013. As per this section, every director shall;

• At the first board meeting in which he participates as director and thereafter
• At the first board meeting 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 or her concern or interest in any company or companies or bodies corporate, firms or other associations of individual which shall include the shareholding in such manner as may be prescribed.

This means, all existing directors and newly appointed directors are required to disclose his or her interest in company or companies or body corporate or firm or in any other association of individuals in a specified manner with details including their shareholdings to the company. In the next year’s first board meeting a revised disclosure of interest has to be submitted by the directors to the company.

In addition to section 184(1) of Companies act 2013, section 117(1) is another important section to be referred for this purpose.

As per section 117(1) of Companies act 2013, certain resolutions and agreements as specified in section 117(3) are required to be filed with registrar of companies.

One of the item as specified in section 117(3) is related to resolutions passed in pursuance to sub section 3 of section 179. In sub section 3 of section 179, last item talks about any other matter which may be prescribed.

For this purpose, few items  are prescribed in Companies (meeting of board and its powers) rule, 2014. One of the item is to take note of disclosures of director’s interest and shareholding.

In our opinion, this means, directors are required to disclose their concern or interest to the company and the company is required to file the board resolution for acceptance of this disclosure with the registrar of companies.

Rule 9(1) of Companies (meeting of board and its powers) rules, 2014, specify that disclosure of director’s interest is to be made in writing in form MBP1.

This means, directors are required to disclose their share holding in form MBP1 in the first board meeting and in case of any changes in between the year then it again has to be disclosed in the next board meeting of directors in form MBP1.

As prescribed in rule 24 of Companies (management and administration) rules, 2014, in the next step, e-Form MGT14 has to be filed with the registrar of companies with attachment of a certified copy of board resolution where such director’s interest has been placed and approved. E-Form MGT14 has to be filed along with attachments within 30 days from the date of passing the board resolution.

Even though it’s not yet clear whether to file Form MBP1 as an attachment to e-Form MGT14 or not. To be on safer side, in our opinion, MBP1 can be filed as an optional attachment to e-form MGT14.

By looking at the language of section 184(1) of Companies act 2013, in our opinion, it appears that disclosure will have to be made even if the director has one share in a company.

Specimen copy of board resolution for disclosure of director’s interest

“RESOLVED THAT pursuant to the provisions of Section 184 (1) of the Companies Act, 2013 read with rule 9(1) of The Companies (Meetings of Board And its Powers) Rules, 2014 the notices of disclosure of interest or concern in Form MBP1 received from directors of the Company as placed before the meeting be and are hereby noted and taken on record by the Board.”

RESOLVED THAT Mr. X, Managing Director of the company be and is hereby authorized to digitally sign forms, declarations and submit Form MGT-14 with the Registrar of Companies

RESOLVED FURTHER THAT Mr. A, Practising Company Secretary be and is hereby authorized to certify Form MGT 14 as above.”