Disqualification of Director: Section 164 contains the conditions in which a director can be disqualified as a director. Determining the condition by which a person cannot be appointed as a director or restricting him from becoming a director of the company covered under Disqualification of a director.
Reason of disqualification can be two
As per Section 164(1) a person shall not be eligible for appointment as a director, if-
(a) He is of unsound mind and has been declared by the competent court.
(b) He is an undischarged insolvent.
(c) He applied and his application is pending for adjudication as an insolvent.
(d) He has been convicted in any offence involving moral turpitude or otherwise and Sentenced to imprisonment for not less than 6 months and a period of 5yearshas not elapsed from the date of expiry of sentence as specified.
Provided that if a person has been convicted of any offence and sentenced to imprisonment for more than7 years then he shall not be eligible to be appointed as a director in any of the company.
(e) Court or tribunal passed an order disqualifying him for appointment as a director and the order is in force.
(f) Not paid any calls amount made by the company for shares held by him, whether alone or jointly with others, and 6 months have elapsed from the date fixed for the payment of call amount.
(g) He has been convicted for offence of related party transactions (RPT) under Section 188 at any time during the last preceding 5 year.
(h) He has not complied with section 152(3) of Companies Act, 2013. (i) If he is a director in more than 20 companies including any Alternative Directorship.
Section 164(2) also provides that no person who is or has director of a company which –
(a) Has not filed the financial statements or the annual returns forany continuous period of 3 financial years; or
(b) Has failed to pay again the security/deposits received by it or pay interest thereon or failed to redeem any debentures on the last date or pay interests thereon and these failures continued for 1 year or more, shall be suitable to be appointed or re-appointed in other company as a director of that company for 5 years from the date on which said company fails in order to do that.
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Posted by: CA Neetu Saini
AKGVG & Associates