Director Disqualification – Companies Act 2013

The Ministry of Corporate Affairs has begun to eliminate companies that are inactive and disqualify Company Directors who have not continuously filed their annual MCA return for more than three years. In this article, we discuss the provisions of the Companies Act 2013 related to the disqualification of the Director and their consequences.

Under the Companies Act 2013, the following conditions may be reasons to disqualify a Director.

• The Director does not have a solid mind and is thus declared by a competent court.
• The Director is an unloaded insolvent.
• The Director has requested to be tried as insolvent and his application is pending.
• The Director has been convicted by a court of any offence, whether involving moral or other depravity, and sentenced against him for imprisonment not less than six months and a period of five years has not elapsed from the date of expiry of the s entity. . In addition, anyone who has been convicted of any crime and sentenced to prison for a period of seven years or more will not be eligible to be appointed a director in any company.
• An order disqualifying the Director from appointing him as a director has been approved by a court or tribunal and the order is in effect.
• The Director has not paid any calls with respect to any action of the company he owns, either alone or jointly with others, and six months have elapsed since the last day set for the payment of the call.
• The Director has been convicted of the offence related to transactions with related parties under section 188 at any time during the past five years.
• A company in which the Director is a party to the Board has not filed financial statements or annual statements for any continuous period of three financial years.
• The company has not refunded the deposits accepted by it or paid interest on it or redeemed any obligations on the due date or paid the interest owed in this regard or paid any dividend declared and such non-payment or redemption continues for a year or more.

As mentioned in point 8, a person may be disqualified from being a Director, if an enterprise in which the person is a Director has not filed the annual MCA return for a continuous period of three years. It is therefore important that all private limited companies, a single person and a limited company submit the annual MCA declaration on time and maintain compliance with the Companies Act 2013.

Consequences of director disqualification

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

Until recently, the MCA has not strictly enforced this provision of the Companies Act. However, as of September 2017, the MCA has begun to strictly enforce these provisions of the Companies Act and has published names of disqualified directors on its website.

Therefore, it is important that all persons who are a Company’s Director ensure that compliance is maintained appropriately.