{"id":1954,"date":"2020-01-07T09:07:03","date_gmt":"2020-01-07T09:07:03","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=1954"},"modified":"2022-09-10T15:05:42","modified_gmt":"2022-09-10T09:35:42","slug":"disqualification-of-directors","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/","title":{"rendered":"An Insight into Section 164, Companies Act: Disqualification of Directors"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Section 164, of Companies Act, 2013 provides the information on the Disqualification of Directors, i.e. the conditions in which a person could be disqualified to hold the position of a director in a company.<\/p>\n\n\n\n<p>&nbsp;The title of Section 164, \u201cDisqualifications\nfor Appointment of Director\u201d which clearly states the grounds on which a person\ncan be considered to be disqualified. In this blog, we are going to study it in\ndetail and cover all the conditions of disqualification of directors and the\ncases in which they can be reappointed.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#What_is_Disqualification_of_Directors\" >What is Disqualification of Directors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#Who_is_the_Director_of_a_Company\" >Who is the Director of a Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#Disqualification_of_Directors\" >Disqualification of Directors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#Why_Directors_are_disqualified\" >Why Directors are disqualified?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#What_is_the_effect_of_disqualification_of_directors\" >What is the effect of disqualification of directors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#What_remedies_are_available_for_the_disqualification_of_directors\" >What remedies are available for the disqualification of\ndirectors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#Reappointment_of_disqualified_directors\" >Reappointment of disqualified directors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/disqualification-of-directors\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Disqualification_of_Directors\"><\/span>What is Disqualification of Directors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Disqualification\nof directors is a way of restricting a person from becoming a director or\ndetermining the conditions in which he\/ she cannot be appointed as a director\nof a company. Furthermore, being disqualified as a company director means that\nhe\/ she cannot be appointed as the director of any company within the time\nperiod specified\/ stated by the court or tribunal.&nbsp;\n\nBut to understand the disqualification of directors, first, we are going\nto see who exactly is a director of a company.\n\n\n\n<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/roles-of-directors-and-shareholders-in-a-company\/\">A Detailed Outlook on the Roles of Directors and Shareholders in a Company<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_is_the_Director_of_a_Company\"><\/span>Who is the Director of a Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company\nitself does not have a physical existence, and it is just a legal entity. A\ndirector is a person who acts on behalf of a company. Furthermore, they are\nprofessional people hired by a company to direct them regarding company\naffairs. Moreover, they are often referred as the Officers of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disqualification_of_Directors\"><\/span>Disqualification of Directors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 164,\nprovides the conditions under which a person can be disqualified to be\nappointed a director of a company in three subsections;<\/p>\n\n\n\n<p><strong>Sub-section 1:<\/strong><\/p>\n\n\n\n<p>A person\nshall not be allowed for appointment as a director of a company, under the\nfollowing conditions;<\/p>\n\n\n\n<ul><li>He\/ she is of unsound mind declared by a competent court;<\/li><li>If he\/ she is an undischarged insolvent;<\/li><li>In case he\/ she has applied to be adjudicated as an insolvent, and his application is pending in the court;<\/li><li>Furthermore, in case he has been convicted or found guilty by a court for any offence. It may include offences related to moral turpitude or any other offence.Furthermore, if a person has been sentenced in respect thereof to imprisonment for not less than six months and if a period of five years has not elapsed from the date of expiry of the sentence;<\/li><\/ul>\n\n\n\n<p>It is\nprovided that if a person has been found guilty of any offence and sentenced\nfor imprisonment for a period of seven years or more, he\/ she could not ever be\nappointed as a director in any company.<\/p>\n\n\n\n<ul><li>Also,      if an order has been passed by a court or tribunal, disqualifying him for      appointment as a director, and the order is still in force;<\/li><li>Moreover,      in cases where the director has not paid any calls related to any shares      of the company held by him, alone or jointly with other officers, and six      months have passed from the last day decided for the payment of the call;<\/li><li>He      has been accused of the offence dealing with related party transactions      as\u00a0<strong>per\u00a0section 188<\/strong>\u00a0at      any time during the last five years;<\/li><li>\u00a0Furthermore,      he has not complied with subsection (3) of\u00a0<strong>section 152 of      Companies Act, 2013<\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/ebooks.html\"><strong>[1]<\/strong><\/a><\/sup><strong> ;<\/strong><\/li><li>He      has failed to comply with the provisions of sub-section (1) of section      165.<\/li><\/ul>\n\n\n\n<p><strong>Subsection 2<\/strong><\/p>\n\n\n\n<p>Subsection 2\nstates that a person will be disqualified to be appointed as a director under&nbsp;if\nhe is or has been a director of a company in the following conditions;<\/p>\n\n\n\n<ul><li>Which has not filed annual returns or financial statements for continuously for any three financial years<\/li><li>In case the director fails to do the following tasks even after a period of one year;<ul><li>Redeem any debentures and pay interest accrued thereon<\/li><li>Pay any dividend declared<\/li><li>Repay the deposits accepted along with interest thereon<\/li><\/ul><\/li><\/ul>\n\n\n\n<p><strong>Sub-section 3<\/strong><\/p>\n\n\n\n<p>If a private\ncompany through its article provides any additional provisions for the\ndisqualification of directors.<\/p>\n\n\n\n<div class=\"shadow1\"><strong>Note:<\/strong> The provisions of the clauses (d), (e) and (g) will not be effective in the following cases;<\/div>\n\n\n\n<ul><li>For a period of 30 days from the date of conviction or order of      disqualification;<\/li><li>Where an appeal or petition is made against order and sentence within seven days until such sentence or order is disposed of;<\/li><li>Seven more days are provided to such disqualified director after being ordered for the conviction, to make an appeal.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Directors_are_disqualified\"><\/span>Why Directors are disqualified?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>&nbsp;Under the Companies Act of 2013, directors can be disqualified on the grounds given below:<\/strong><\/em><\/p>\n\n\n\n<ul><li>In case the director has not filed the annual returns and financial      statements of the company for a period of three years successively.&nbsp;<\/li><li>Where the company fails to pay interest on deposits or fails to repay      the deposit made to it.&nbsp;<\/li><li>If the organization has failed to pay the interest due or fails in redeeming debentures on the due date.<\/li><li>Failure to pay the declared dividend and continue in failing for a period of more than one year could result in disqualification of the company\u2019s director.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">The other\nreasons for directors\u2019 disqualification are:<\/h3>\n\n\n\n<ul><li>If the director has applied\nfor adjudicating as an\ninsolvent.<\/li><li>If any court\nhas earlier ordered the disqualification of the director.&nbsp;<\/li><li>If the\ndirectors does not inform\nabout their particular\nshares in any company held by them alone or in collaboration.&nbsp;<\/li><li>If the director has been convicted of any offence and sentenced to imprisonment of more than 6 months by the Court.&nbsp;<\/li><li>If it is confirmed by any\nCourt that the director is of unsound mind.<\/li><li>If the director of the company is convicted under section 188 by the Court\nconcerning party\ntransactions by the\ndirector during last five years.&nbsp;<\/li><li>The Court can disqualify the directors\nwho are undischarged insolvent.&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_effect_of_disqualification_of_directors\"><\/span>What is the effect of disqualification of directors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A person once\ndisqualified, could not be appointed a director of the company or any other\ncompany for a period of five years or for the time period as prescribed.\nAdditionally, on the other hand, the Ministry of Corporate Affairs has been\nstrictly enforcing these provisions to ensure compliance is maintained\nproperly. For the same reason, the body has recently published the names of the\ndisqualified directors on the official MCA website.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_remedies_are_available_for_the_disqualification_of_directors\"><\/span>What remedies are available for the disqualification of\ndirectors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In case of\ndisqualification, a director can make an appeal to the National Company Law\nTribunal (NCLT). Furthermore, he\/she can temporarily ask for a stay order from\nthe tribunal. Moreover, according to the Companies Act 2013, an order\ndisqualifying a director is not effective within the next 30 days.\nAdditionally, as soon as an appeal is initiated, the disqualified person will\nstill continue to be the director of the company for the next seven days.\nWithin this period, he can file his annual returns or fulfil the needs of any\nother conviction to stay the order of disqualification.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reappointment_of_disqualified_directors\"><\/span>Reappointment of disqualified directors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>However,\nthere is no provision to reappoint a disqualified director. Furthermore, he\/\nshe can only be reappointed if a period of five years has elapsed from the date\nof disqualification. However, in case the director complies with the prescribed\nprovision or rectifies his\/ her mistake, then they can be appointed as a\ndirector again.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per\nsection 252 (3) of Companies Act, it is mandatory for the company to file an\napplication to revive itself in relation to the disqualification of directors.\nAdditionally, this application can be made by the member, creditor or even a\nworkman. But, the disqualified directors can not be reappointed in the same or\nany other company until and unless he\/ she rectifies his \/ her mistake.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/types-of-directors-in-the-privately-held-organization\/\">A Complete Overview on the Types of Directors in the Privately held Organization <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 164, of Companies Act, 2013 provides the information on the Disqualification of Directors, i.e. the conditions in which a person could be disqualified to hold the position of a director in a company. &nbsp;The title of Section 164, \u201cDisqualifications for Appointment of Director\u201d which clearly states the grounds on which a person can be [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":1955,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[369],"tags":[257],"acf":{"service_id":"328"},"authorName":"Savvy Midha","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/10\/Savvy-Midha.jpg","authorDescription":"Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. She is an experienced Legal and Financial writer with expertise in research, drafting, and copy-writing.","postViews":49486,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/1954"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=1954"}],"version-history":[{"count":16,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/1954\/revisions"}],"predecessor-version":[{"id":48611,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/1954\/revisions\/48611"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/1955"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=1954"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=1954"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=1954"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}