Section 189 of the Companies Act, 2013
Section 189 of the Companies Act, 2013 deals with the Register of Contracts or Arrangements in which Directors are interested.
📘 Section 189 – Register of Contracts and Arrangements in Which Directors are Interested
This section mandates that every company (except certain exempted ones) must maintain a register containing details of:
Contracts or arrangements in which one or more of its directors are interested, directly or indirectly.
✅ Key Provisions:
🔹 1. Maintenance of Register [Sub-section (1)]
A company must maintain a register (Form MBP-4) that records all contracts or arrangements under:
Section 184(2) (Disclosure of interest by directors),
Section 188 (Related party transactions).
This register must include:
Names of interested directors,
Particulars of contracts/arrangements,
Date and nature of interest or concern.
It must be kept at the registered office and be available for inspection during business hours.
🔹 2. Entry and Signing [Sub-section (2)]
Entries must be made chronologically and signed by the Company Secretary or any other authorized person within 30 days of the meeting.
🔹 3. Inspection by Members [Sub-section (3)]
The register shall be open for inspection by members of the company and can be requested during business hours (minimum two hours on any working day).
🔹 4. Applicability
This section does not apply to:
One Person Companies (OPC),
Contracts entered into by the company in ordinary course of business at arm’s length basis (in some cases under Section 188).
⚠️ Penalty for Non-Compliance [Sub-section (6)]:
If a company fails to maintain or allow inspection of the register:
The company and every officer in default is liable to a penalty of ₹25,000.
📌 Example:
If a director of XYZ Ltd. is also a partner in a firm to which XYZ awards a contract, details of this transaction must be recorded in the MBP-4 register with full disclosure.
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