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Register Of Contracts Or Arrangements In Which Directors Are Interested

November 6, 2015

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Section 189 of the Companies Act, 2013 read with Section 184, 188 of Companies Act, 2013 and Rule 16 of Companies (Meetings of Board and its Power) Rules, 2014
  1. APPLICABILITY: This section applies to every company including banking and insurance Company.
  2. EXPLANATION: This section provides that every company is required to maintain a register in Form No. MBP-4. This register gives the particulars of all the transactions to which sub-section (2) of section 184 or section 188 applies and it is required to be maintained in such manner as prescribed under Section 189 of the Companies Act, 2013.
  3. REQUIREMENTS: The following transactions are required to be recorded in the said MBP-4 register: -
    1. Particulars of every company or companies or Bodies Corporate (BC), firms or Association of Individuals (AOI) in which any director of the Company has any concern or interest. This interest or concern in other companies, firms, BC or AOI is disclosed by the director himself in Form MBP-1 as required under section 184 of the Companies Act 2013. The said interest or concern of directors also includes shareholding interest, if any, in other companies. However, if the shareholding of any of the directors of one company or two or more of them together in another company does not exceed 2% (two per cent) of the paid up share capital of the such other company, then such interest is not required to be mentioned in the register maintained in Form MBP-4.
    2. Contract or arrangement entered into:
      • with a body corporate in which such director or such director in association with other directors of the Company holds more than 2% of the shareholding of that company or body corporate or is a promoter, manager, CEO of that company or body corporate; or
      • with a firm or any other entity in which such director or any other director of the Company is a partner, owner or member as the case may be.
    3. Contracts or arrangements with the related parties with respect to which Section 188 applies.
  4. EXCEPTIONS: However the following contracts or arrangements are not required to be included in MBP-4 Register as provided in sub Section (5) of Section 189:-
    1. The contracts or arrangements for sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed Rs. 5,00,000/- (Rupees Five Lakh Only) in an aggregate in any year.
    2. Contracts or arrangements by a banking company for the collection of bills in the ordinary course of its business.
  5. DISCLOSURE: Every director shall within 30 days of his appointment or relinquishment, as the case may be, disclose to the company the details of concern or interest in other associations which are required to be included in MBP-4. In case the director fails to comply with the provisions of this sections and rules made thereunder then such director shall be liable to a penalty of Rs. 25, 000/- (Rupees Twenty-Five Thousand Only)
  6. MAINTENANCE OF THE REGISTER: This register is required to be maintained by every company and after entering the details as mentioned above, it shall be placed in the next board meeting and shall be signed by all the directors present at the meeting. Entry in this register shall be made in chorological order and every entry shall be authenticated by the company secretary or by such other person authorized by the Board. This register shall be kept at the registered office of the company and shall be kept in the custody of the company secretary of the company or such other persons authorized by the board and shall be open for inspection during the business hours and extracts can be taken therefrom. This extracts shall be provided by the Company to the members within (07) seven days of the receipt of such request and on receipt of such fees as may be prescribed in the articles of association of the company but the said fees should not exceed Rs. 10/- (Rupees Ten Only) per page. This register shall be kept open at every annual general meeting of the company and shall be accessible to every person who has the right to attend the meeting.


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