Over the years, the Ministry of Corporate Affairs has been clinical in bringing reforms in the Companies Act to streamline the way the business world operates. One of the stricter yet complex reform by the MCA was to bring director disqualification of defaulter companies into the picture. This rule came through an amendment in the companies act. It gave Registrar of Companies (RoC) a right to disqualify directors of companies who have not submitted their financial details and other records to RoC for the previous three years. The disqualification banned directors form directorship for five years. Now there are means to remove director disqualification but the obvious question that comes to mind, is it really necessary? Here are the things that will happen if you don’t remove the director’s disqualification
- The rule clearly states that the directors once disqualified, will be rendered ineligible for appointment in any other company for five years. This means an abrupt break on the illustrious corporate career for five long years which is really not a chance anyone would like to take on their career.
- Even after disqualification, the director won’t be free from the liability of their company. So, it will be better if directors opt for removal of disqualification and deal with the liabilities simultaneously.
- The directors face may also face huge penalties due to non-compliance of RoC rules.
- Imprisonment of one year or a fine of 1 lakh to 5 lakh is sanctioned in the law if a director tries to continue directorship even after disqualification.
In short. One can safely say that using any easier mean to remove director disqualification is relatively safer to keep career from going downhill. This not only saves a career from a break of five long years but also it keeps the reputation of the director alive. A disqualification by RoC could prove to be a blot on the career of director and it becomes really hard to restart career after five years with that defamatory record behind. To avoid all this, the directors are advised to follow all the norms of the Companies Act and if due to some reason they get disqualified, then they must not sit idle and find ways to remove director’s disqualification. The most preferred method of director disqualification removal is drafting and filing a writ petition in the High Court and asking for relief from disqualification. A disqualified director can approach any reputed legal firm to get the writ petition drafted or explore other methods of disqualification removal.
“Starting early will always keep you ahead of those who don’t”.
Author: Adv Sharlee Garg
Muds Management Private Limited
Mobile number: 91-9599653306
Email id: [email protected]
*The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article*