Section 189: register of contracts in which directors are interested

Introduction

Section 189 makes directors’ interests in company contracts visible. Directors and key managerial personnel must disclose their interests within thirty days of appointment or relinquishment of office, and the register is open to members and produced at every annual general meeting.

Small supply contracts of up to five lakh rupees in a year and a banking company’s bill collection are excluded from the recording duty in sub-section (1).

Key takeaways

Make the entries

Keep one or more registers giving separately the particulars of all contracts or arrangements covered by section 184(2) or section 188, in the prescribed manner. After entry, place the register before the next Board meeting for signature by all directors present. Rule 16 of the Companies (Meetings of Board and its Powers) Rules, 2014, as first notified, prescribes Form MBP 4, chronological entries and authentication by the company secretary or another authorised person. The rule text cited here is the version first notified in 2014; MCA has amended these Rules since, so confirm the current consolidated rule before relying on any figure or form.

• India Code — consolidated Companies Act, 2013, section 189
• eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
• MCA — Companies (Meetings of Board and its Powers) Rules, 2014, as notified by G.S.R. 240(E)

Collect director and KMP disclosures

Within thirty days of appointment or relinquishment of office, every director and key managerial person must disclose the particulars in section 184(1) about their interest in other associations, or other prescribed information about themselves.

Keep, show and produce the register

Keep the register at the registered office. It is open for inspection during business hours; members may take extracts and obtain copies on payment of the prescribed fee. Produce it at the start of every annual general meeting and keep it open and accessible during the meeting to anyone entitled to attend.

Exclusions

Sub-section (1) does not apply to a contract for the sale, purchase or supply of goods, materials or services worth up to five lakh rupees in aggregate in any year, or to a banking company’s collection of bills in the ordinary course of business.

Practical preparation

Map section 184(2) and section 188 contracts; enter each in the register; table it at the next Board meeting for signature; diary thirty-day disclosures on appointments and exits; bring the register to the AGM.

Practical checklist

Glossary

Key managerial personnel

The statutory category of senior officers, such as the managing director, company secretary and chief financial officer.

Section 184(2) contract

A contract or arrangement in which a director is concerned or interested through a body corporate, firm or other entity as described in that sub-section.

Frequently asked questions