RoC or Registrar of Companies has become strict towards the directors of non-compliant companies in recent years. Since September 2017, based on the relevant rules and provisions mentioned in the Companies Act, 2013 the RoC working under Ministry of Corporate Affairs (MCA) has disqualified more than 2 lakh company directors that failed to file their annual returns and other relevant documents. MCA had also published the names of the disqualified directors on its website. The disqualification from being appointed as a director to a company is mainly dealt by Section 164 of the Indian Companies Act, 2013. According to this Section, any one or more than one of the following reasons can disqualify a director in India from their position in a company.
Reasons for Disqualification
- Conviction of any offence which involved imprisonment up to Seven Years or More.
- Any offence or delinquency committed by the person in connection with the Related Party Transactions (RPTs) during the preceding five years.
- If the person or his/her company has not filed, the Financial Statements or Annual Returns for any continuous period of three financial years.
- Found guilty of any irregularities of delinquencies related with the repayment of accepted deposits, redemption of any debentures, payment of due interest on the deposits or debentures, etc. For One Year or More.
- Non-compliance with the provisions stipulated in Part I of the Schedule V of the Indian Companies Act, 2013.
- And, any clauses of disqualification for appointment as a director, given in the Articles of the employing private company.
According to Section 274 of the Companies Act, Any person facing director’s disqualification will not be eligible for being appointed as a Director in any company for a time period of 5 years.
How to Become a Director Again after Disqualification
As stated in the Sub-Section (3) of Section 164 of the Companies Act of 2013, any disqualifying conviction or order does not take effect within 30 Days. Hence, the concerned director can file the overdue annual returns and appeal to the NCLT within those 30 days, to stay the proceedings. Once, an earnest appeal is initiated, the concerned director can continue to hold their post until the expiry of seven days counted from the date on which the appeal/petition is disposed of.
The company must replace the existing disqualified directors by appointing new directors, who will then sign the returns and other compliances digitally under the MCA, Income Tax Act, etc. Thereafter, a director should file an application to the NCLT (National Company Law Tribunal) for rendering the current status of the company ‘Active’. The directors can also approach their respective High Courts by filing a writ petition to remove disqualification and get their DIN reactivated. By Court’s orders, the director’s disqualification can be removed, and the director can be reappointed in any other company. Taking legal help for such proceedings is necessary and a director should opt for a reputed legal firm to file a writ petition for the removal of director disqualification.