A director can be disqualified from holding office under Section 164 of the Companies Act, 2013. Disqualification means the person cannot be appointed as a director of any company for a specified period.
The grounds
A person is disqualified if:
- They are of unsound mind and have been declared so by a court
- They are an undischarged insolvent
- They have applied to be adjudicated as an insolvent
- They have been convicted of an offence involving moral turpitude and sentenced to imprisonment of six months or more
- They have been convicted of an offence under the Companies Act and sentenced to imprisonment of six months or more
- They have failed to file the annual return or financial statements for three consecutive years
- They have failed to repay deposits or interest, or to redeem debentures or pay interest, for one year or more
- They have failed to pay the dividend declared for one year or more
The consequences
A disqualified director cannot be appointed as a director of any company for five years from the date of disqualification. The director must vacate the office immediately. The company must file Form DIR-9 with the ROC for every director who is disqualified.
The practical points
The company should check the disqualification status of every director before the appointment. The director should file the necessary declarations. A disqualified director who continues to act is liable to penalty. The company should update the register of directors and file DIR-9 within the prescribed time.
Call to Action: We advise companies on director disqualification, DIR-9 filings and compliance. For a disqualification review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.