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Scetion 184 (2) of the companies act 2013

sanjiv (Asst. Company Secretary) (75 Points)

10 March 2016

There are Two Companies; Company ABC Ltd. (Holding Company) and Company XYZ Ltd. (Wholly owned subsidiary) Directors in Company ABC Ltd. are Mr. X (5% shareholding), Mr. Y (10% shareholding) and Mr. Z (20% shareholding) Directors in Company XYZ Ltd are Mr. X, Mr. Y and Mr. Z (No director shareholding) Now both the companies are entering in to an arrangement, should XYZ Ltd treat Mr. X, Mr. Y and Mr. Z as interested directors in the arrangement.

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7 Replies

prakash (Company Secretary) (1352 Points)
Replied 10 March 2016

Yes, As per section 2 (76) of the CA, 2013, they are related parties.

sanjiv (Asst. Company Secretary) (75 Points)
Replied 10 March 2016

Hi Thank you.

Suppose Mr. X holds 1%, Mr. Y holds 0.5% and Mr. Z holds 3% in ABC Ltd, then Mr. X and Mr. Y leaving aside Mr. Z, can participate in the Board Meeting of XYZ Ltd. in which the arrangement is to be discussed right?

prakash (Company Secretary) (1352 Points)
Replied 11 March 2016

None o them can participate in such meeting since all directors(XYZ) holding put together exceeding 2%.

Pratik Shah (Practising Company Secretary) (4432 Points)
Replied 12 March 2016

Aren't these Private Limited Companies?

sanjiv (Asst. Company Secretary) (75 Points)
Replied 12 March 2016

These are public limited cos

ACS Parul Rawat (Entrepreneur | Corporate Law Advisor | Lawyer in Making | AIR-8) (218 Points)
Replied 12 March 2016

As per Section 184(3) if the director participates in meeting after disclosure of interest, the arrangement can be VOIDABLE ONLY AT THE OPTION OF THE COMPANY. I guess you can take advantage of this sub-section OR you can appoint Additional directors to discuss the agenda.

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