Directors’ Disclosure of Interest: Form MBP-1 and the Board Record

A company is considering appointing a supplier in which one of its directors has a financial interest. The director has already disclosed that interest in Form MBP-1. What should the company do before the Board considers the contract?

Section 184 of the Companies Act, 2013 distinguishes between a director’s general disclosure of interests and disclosure in relation to a specific contract or arrangement. The general disclosure helps the company identify potential conflicts. The proposed transaction must still be assessed on its own facts.

When is Form MBP-1 required?

Under Section 184(1), a director must disclose the relevant interests at the first Board meeting in which they participate as a director and again at the first Board meeting of each financial year. If a previously disclosed interest changes, the director must disclose the change at the first Board meeting held after it occurs.

The disclosure covers interests in companies, bodies corporate, firms and other associations of individuals, including shareholdings. Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014 prescribes written notice in Form MBP-1.

When should the Board consider a separate disclosure?

Consider a proposed contract with a partnership firm in which a director of the company is a partner. Even if the director has listed the firm in Form MBP-1, the company should assess the proposed contract under Section 184(2), taking into account any exemptions or modifications applicable to its class of company.

Where a transaction-specific disclosure is required, the Board minutes should record the relevant agenda item, the nature of the interest and how the director’s participation was handled. Any related party approvals or other requirements should be considered separately.

What should the company retain?

Rule 9 requires the notices to be kept at the registered office for eight years from the end of the financial year to which they relate. The company secretary or another person authorised by the Board is responsible for their custody.

As a practical matter, retain dated notices alongside the corresponding Board minutes. When a disclosure changes, keep the earlier notice with the updated one so the company can establish what was disclosed and when.

Before circulating a Board agenda, compare proposed counterparties with the latest disclosures. This gives the company time to identify matters requiring review and helps the minutes accurately reflect how each interest was handled.

This article is for general information. The requirements applicable to a particular company or transaction depend on its facts and any applicable exemptions or modifications.