Section 184 of the Companies Act, 2013: Disclosure of Interest by Directors

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What Section 184 says, in one line

Every director of an Indian company must disclose their concern or interest in any company, body corporate, firm, or other association of individuals — and must recuse from decisions where that interest touches a contract or arrangement the board is considering.

When does disclosure happen?

A director is required to disclose interest at three touchpoints: at the first board meeting of every financial year; whenever there is a change in their interests during the year; and at the first board meeting after their appointment as a director.

The vehicle for this disclosure is Form MBP-1, which is kept at the registered office and does not need to be filed with the Registrar of Companies.

Section 184(2) — the contract-specific obligation

If the company is about to enter into a contract or arrangement with a body corporate in which the director (or, together with other directors, a group of directors) holds more than 2% of the share capital, or with a firm or entity in which they are a partner/owner/member, the director must:

  • disclose the nature of their concern or interest at the board meeting where the contract is discussed; and
  • not participate in the discussion on that item.

What happens if a director does not disclose?

Non-compliance with Section 184 attracts a penalty under Section 184(4): the director is liable to a penalty of ₹1,00,000. Contracts entered into in breach of Section 184(2) are voidable at the option of the company.

Quick checklist

  • MBP-1 obtained at first board meeting of the financial year.
  • MBP-1 updated on any change of interest.
  • Register of contracts (MBP-4) kept up to date.
  • Interested director recuses on the specific agenda item and this is minuted.

Sources: Companies Act 2013, Section 184; Companies (Meetings of Board and its Powers) Rules, 2014; Secretarial Standard on Meetings of the Board (SS-1).

Educational content only, not legal advice. Consult a qualified CS for professional advice.