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Disqualification of Directors Under Sector 164(2)

disqualification of directors

According to the 2013 Companies Act, a director is a person designated to carry out the responsibilities and obligations of a company’s director. A director may be disqualified for various reasons, including unethical or fraudulent trade or behaviour deemed “unfit.” An investigation and disqualification will follow failure to uphold your director’s responsibilities.

Having a person banned from serving as a director of a business or directly or indirectly participating in a company’s development, establishment, or management without the Court’s permission is a director’s disqualification.

What is the director’s disqualification?

Disqualification of directors is a technique to prevent someone from being nominated as a director or to specify the circumstances under which they cannot do so. Additionally, suppose a person is disqualified from serving as a corporate director. In that case, they cannot be appointed as the director of any business within the time frame established by the Court or tribunal.  

Recently, Disqualification of Directors has increased significantly. The Ministry of Corporate Affairs cites various causes, including unsuccessful companies and failure to file compliances. If you stop them, you may keep yourself from losing your eligibility.

Reasons for disqualification of directors

Following Section 164 of the Companies Act 2013, the following circumstances may lead to disqualification of directors:

  • A court with jurisdiction has determined that the director is mentally ill.
  • The director is an unresolved bankrupt.
  • The application for the director’s adjudication as an insolvent is still pending.
  • Before the director was found guilty by a court of any offence, whether it entailed moral turpitude or not, and sentenced to jail for at least six months, five years had passed since the day his sentence was completed. Additionally, no one convicted of a crime and given a prison term of seven years or longer is permitted to be nominated as a director of any firm.
  • A court or tribunal has issued and is now in effect with an order disqualifying the director from appointment as a director.
  • Six months have passed since the last date set for the payment of the call, and the director has not paid any calls concerning any shares of the firm that he owns alone or jointly with others.
  • The director has been found guilty of a related party transactions-related offence under section 188 at any point in the five years before.
  • A corporation of which the director is a member of the board has yet to submit financial reports or annual returns for any three consecutive financial years.
  • For one year or longer, the company has not repaid the deposits it accepted, has not paid interest on those deposits, has not redeemed any debentures by their due date, has not paid interest owing on those debentures, and has not paid any stated dividends.

Effect of director disqualification

For five years or the period specified, a person disqualified from serving in that capacity cannot be appointed as a company director or any other company. To ensure full compliance is maintained, the Ministry of Corporate Affairs has also strictly enforced these provisions. For the same reason, the organization recently made the identities of the directors who were disqualified public on the official MCA website.

Appeal on disqualification of a director

A director can apply to the National Company Law Tribunal (NCLT). He may seek the tribunal for a temporary stay order. 

To temporarily delay the order, a disqualified Director may appeal the ruling with 30 days’ notice. A director disqualification order is not effective within 30 days of a conviction that results in a sentence or order, according to the Companies Act of 2013. Following the filing of an appeal, the person would remain in their position as director for an additional seven days following the decision date of the request or petition. As a result, anyone who has received an order has 30 days to file an appeal and submit returns to have the order of director disqualification stay.

For the disqualification of directors to be lifted, the procedures listed below must be followed:

  • In the first stage, make a written petition and submit it to the High Court.
  • A lawyer must show up for the pleadings.
  • The High Court must issue a temporary order.
  • The High Court’s order and the pending compliance paperwork will send to the Company Registrar.
  • Once the procedures mentioned above have been completed, the Director Identification Number (DIN) will be activated, and the disqualification of directors will be lifted.

The procedure will be finished in around ten days. The disqualified person will continue to serve as the company’s director for the following seven days after an appeal is launched. He has this time to file his annual returns or fulfil the requirements of any other conviction to have the order of disqualification stayed.

Solution for director disqualification

To prevent the director who had been removed from office from filing past-due reports, DIN was momentarily reactivated. By doing this, the Directors’ disqualification was lifted, and the DIN was restored. The defaulting corporation is obligated by section 403 of the Companies Act to pay an extra fee in addition to the filing fee.

The company then filed an e-CODS, 2018, and a fee for finding Delay’s Condonation. Following this scheme, incomplete annual return filing forms must be submitted. However, several businesses did not comply with the requirements, so they were expelled from the plan at its conclusion, and their directors had to be removed.

Directors were only reactivated following the NCLT order of those de-registered corporations seeking resurrection under section 252. Registrars responded appropriately to those businesses that needed to follow the rules. Numerous companies have profited from this initiative.


We hope you are now understand about the disqualification of directors. What are the reasons, effect, and solutions for disqualification of directors under Companies Act 2013.

To reinstate it, the business must apply once directors are disqualified under section 252(3) of the Companies Act. Members, creditors, or even employees may also submit this application. Only qualified directors are eligible for re-appointment in the same corporation or any other business if they rectify their mistake.

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