It was a routine practice followed by the Companies to take declaration from a Director under section 274 (1) (g) of the CA 1956 as on last day of the financial year and Disclosure of Interest from a Director under Section 299 (1) before beginning of the next financial year in a form 24AA. Because of commencement of new Act the said Disclosure obtained before 31st March 2014 may not hold good & fresh disclosure is required.
On applicability of Companies Act 2013 with effect from 1st April, 2014 director is required to make a disclosure of his interest to the Company under section 184 (1) & (2) of the CA 2013. The said disclosure is required to be made in form MBP 1 and will be for the financial year 2014-15. The said declaration is required to be placed & noted in the first Board meeting of the financial year 2014-15. Further said Board Resolution ( noting of declaration) is required to be filed under Rule 8 (5) of Chapter XII with the Registrar in Form MGT 14 within 30 days of passing.
The said disclosure will provide the details of his interest in all other companies,entities and concerns along with his shareholding, irrespective whether Company is entering into a contract or transactions with such entities or concerns or not. The said disclosure will act as a general disclosure and will preclude director form a default if any happen because Company or its officer entering into a transaction with such entity or concern without his knowledge.
Hence it would not be a good on the part of a Director to avoid giving this disclosure or avoid providing full information to the Company. Default under this sections will lead to automatic vacation of office by a Director without any recourse available to it.
Declaration under section 274 (1) (g) of CA 1956 will continue to be in old format since it was pertaining to the financial year 2013-14.
Quick action in this area is expected.
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Dear Sir,
Please send the panel provision related to Independent Director.
Dear Sir,
Both the forms are not different significantly. Should we not go by ‘substance over form’ and accept old disclosures as sufficient compliance in spirit instead of going into legal technicalities ?
Sitaramji,
I presume that you have take the disclosure dated prior to 31.3.2014. The same was under the old law. The form number is also old. I don’t think it would be proper compliance of law to continue with the old declaration which is not valid today. Individual Director would be in problem for not giving proper disclosure.
It is not clear from sub section (1) of section 184 that whether a director in company, in which he is director, should give disclosures in MBP – 1 about his shareholding or not (irrespective of % of his holding) of a company in which he is not a director but holding shares?
The confusion arises because of the fact that as per sub-section (1), disclosures by director has to be given in the first meeting of Board to disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding whereas in provision of sub section (5) and (2) of section 184, it deals with concern or interest in a contract or arrangement that in contract or arrangement if shares are held more than 2% in any Body corporate then the director concern is required to disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed.
Dear Usha,
Disclosure under 184 is to a Board of the Company in which he is occupying the position as a director. ( irrespective whether he holds any shares or not) The term disclosure itself indicates that he is disclosing the facts which are otherwise not know to the Board. Hence he will disclose his interest in other companies. In case of his interest in Public company disclosure is to be made only if he holds more than 2%. Further rules under section 188 prescribes that such public company would be related party only if such director is director and holding more than 2% shares.
Trust i have understood your query correctly and replied to your satisfaction.
Dear Sir,
Query with regard to MBP 1.
Facts : Mr X is a director cum shareholder in ABC Pvt Ltd. He is also a shareholder (only, not a director) in PQR Pvt Ltd & MNO Ltd ( Holding more then 2 % Shares in PQR & MNO )
Query :
1 . While submitting MBP 1 in ABC Pvt Ltd, does Mr X also needs to disclose the share held in PQR Pvt Ltd & MNO Ltd ?
2. Does the interpretation change if shares held are less then 2% ?
3. Interpretation remains the same irrespective of type of company ( Private or Public ) ?
Your prompt action and response is much appreciated.
Thanks & Regards
Amit Chougule
Belgaum.