Q. Is proprietorship firm included in section 184 of the Companies Act, 2013?

Question

If a Director is a proprietor of proprietorship firm, does section 184 get triggered and disclosure in Form MBP-1 required for this entity?

Reason for this question- Plain reading of language of section 184(1), proprietorship firm is not covered anywhere. Wherever the word 'Firm' has been used, it is in the context of Partnership Firm. However, section 184(2) used the words 'entity' and 'owner'. Extracts is gives as below:

(1) Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding, in such manner as may be prescribed.

1,2&3[(2) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into—

(a) with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or

(b) with a firm or other entity in which, such director is a partner, owner or member, as the case may be,

shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting:

 

Answer 1

The section per se does not prescribe, but s. 184 (2) applies for s. 188 too. It would be better to disclose, though not legally required as per the section itself.