Introduction

A company is a legal entity and does not have any physical existence. It can act only through natural persons to run its affairs. The person, acting on its behalf, is called Director. But there are certain conditions subject to which one can become the director of the company. One cannot be appointed as director of a company if he is disqualified under Section 164 of Companies Act, 2013.

Section 164 of the Companies Act specifies these conditions subject to which one is disqualified from being appointed as a director of the Company.

• The Director is of unsound mind and stands so declared by a competent court.
• The Director is undischarged Insolvent
• The Director has applied to be adjudicated as an insolvent and his application is pending.
• The Director is convicted by a court of any offence and is sentenced imprisonment for not less than six months and period of 5 years is not elapsed from date of expiry of sentence.
• If the director is sentenced imprisonment imprisonment in relation to an offence for a period of not less than 7 years will not be eligible to be appointed as director of a company.
• The director has not paid any calls for the shares held by him and a period of 6 months is elapsed from the last date fixed for payment of call.
• The director is convicted of an offence dealing with related party transaction under Section 188 during last preceding 5 years.

Example 2:

Mr Anil was part of Board of director of SRV Pvt Ltd and Rayon Pvt Ltd. Rayon Pvt Ltd had not filed its annual return for 3 consecutive years and hence Mr Anil is disqualified from being a director of both Rayon Pvt Ltd and SRV Pvt Ltd.

Consequences

Once a person is disqualified as a Director, he/she will not be eligible for being appointed as Directorof that company or any other company for aperiod of 5 years from the date on which the company failed to file annual compliance.

Appealing Director Disqualification Order

The order disqualifying a Director does does not take effect within 30 daysof conviction resulting in sentence or order. Hence, any person who has received an order order can file the returns and appeal within 30 days to stay the proceedings.

How can we help

In order to ensure proper compliance with laws and regulation and to ensure that the director is appointed with due diligence we will assess and ensure that the proposed director is not disqualified from being appointed by performing a background study and keep you updated with rules and regulations.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."