Section 184 of Companies Act 2013: Why Directors Must Disclose Their Interests

In corporate governance, trust is everything.
And trust usually breaks when decisions are taken behind closed doors, especially when personal interests are involved.

That’s exactly why Section 184 of the Companies Act, 2013 exists.

This provision forces transparency. It requires directors to openly disclose their personal and financial interests in other companies, firms, or entities. Not later. Not when asked. But upfront. And every time something changes.

The idea is simple. If a director has something to gain personally, the board should know about it before decisions are taken.

What Counts as a Director’s “Interest”?

Interest doesn’t just mean money in hand.

It can be:

• Shareholding in another company

• Being a director elsewhere

• Partnership in a firm

• Employment or advisory role

• Any contract or arrangement with another entity

Even indirect interests matter.

Section 184 doesn’t assume wrongdoing. It simply assumes transparency is non-negotiable.

When Must Directors Make This Disclosure?

The law is very specific here.

A director must disclose:

• At the first Board meeting of every financial year, and

• At the next Board meeting, whenever there is any change

This keeps records fresh and avoids the excuse of “old information”.

Once disclosed, the details become part of the company’s official records. Auditors can see them. Regulators can check them. Shareholders are protected.

Why Section 184 Is So Important

Directors influence strategy, contracts, vendors, investments—pretty much everything.

Without disclosure, decisions can quietly tilt in favour of a director’s personal interest. That’s where problems start.

Section 184 ensures that:

• Directors don’t misuse their position

• Conflicts are identified early

• Boards take informed decisions

• Shareholders are not kept in the dark

It’s a safeguard. Not a punishment.

Companies that follow this rule properly usually face fewer disputes and cleaner governance overall.

What Companies Should Actually Do in Practice

Compliance doesn’t need to be complicated.

Smart companies usually:

• Collect disclosures from all directors at the start of the year

• Update disclosures whenever changes happen

• Maintain a register of directors’ interests

• Review disclosures before approving contracts

• Record everything properly in board minutes

This makes conflict management routine instead of reactive.

What Happens If a Director Doesn’t Disclose?

This is where things get serious.

Non-compliance with Section 184 can lead to:

• Monetary penalties

• Contracts being challenged or cancelled

• Regulatory scrutiny

• Loss of credibility for the board

• Long-term reputational damage

And once trust is lost, it’s hard to rebuild.

Public vs Private Companies – Same Rule, Same Risk

Some people assume private companies get flexibility here. They don’t.

Section 184 applies to all companies, public or private.

Public companies feel the impact faster because of investors and market scrutiny.
Private companies feel it during disputes, audits, or funding discussions.

Either way, disclosure protects everyone involved.

Real-World Situations Where Section 184 Matters

A director owns shares in a vendor company. Disclosure allows the board to review the contract objectively.

A director sits on the board of a joint venture. Disclosure ensures decisions remain unbiased.

A director’s relative runs a service provider. Disclosure keeps transactions clean and defendable.

These aren’t rare cases. They’re everyday governance situations.

Best Practices That Actually Work

Companies that stay compliant usually do these things well:

• Keep disclosures updated, not forgotten

• Include disclosure as a standard board agenda item

• Educate directors about fiduciary duties

• Treat disclosure as protection, not suspicion

It’s about discipline, not paperwork.

Final Thoughts

Section 184 of Companies Act, 2013 is not about restricting directors.
It’s about protecting companies.

By forcing disclosure of interests, the law ensures decisions are fair, transparent, and defensible. Companies that follow this rule build trust with shareholders, regulators, and investors—and avoid messy conflicts later.

If you need help with Section 184 compliance, maintaining interest registers, or reviewing board disclosures, Callmyca.com can guide you step-by-step and keep your governance clean.