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Disqualification of Directors | Company Vakil

A company cannot act on its own without the existence of people. A person who represents the company is known as a director. These are professionals who are direct affairs of the company, they These are also referred to as company’s officers. This position of a director can be given to any person in the company .India’s company laws do not state any qualifications for the position of a director. Hence a company lays down its own requirements for this position.

Directors Disqualifications

As stated in the company laws, disqualification of a director can occur due to the following reasons:

  1. If one becomes of unsound mind or the court declares them to be so.
  2. Insolvency.
  3. If one is in the process of being declared insolvent or having a pending application.
  4. If one is a convict or has been apprehended in the court due to unwanted behaviors or has been behind bars for more than seven years then is not eligible to be appointed for this position.
  5. If a tribunal or a court order has been placed disqualifying the appointment in this position.
  6. If one has not paid for any shares whether jointly or alone in the company they are working in and they have ignored time required for the payment of the shares.
  7. If one has been charged with offences regarding transactions in the company for the past five years in the company.
  8. If one has no director identification number.
  9. If one has not filed the required DIR-3 KYC form.

New DIR – 3 KYC FORM

A rule was passed by the Ministry of Corporate Affairs (MCA) making it a must for directors all over India to file e-KYC form annually. This is through the introduced form,DIR-3KYC and should be filed before 31st March 2018 and 31st August 2018.Directors are required to file this form with their own DSC and should be approved by practicing professionals.

If a director fails to fill this form within the specified time frame their DIN will be deactivated thus can lead to them being disqualified.

 

Effect of Disqualification

Whenever one is disqualified they cannot be appointed as director in the same company or any other company. This is a 5 years restriction. From 2017 the Ministry of Corporate Affairs (MCA) begun enforcing the regulations required strictly. Since then a list of disqualified directors has been published in the government’s web portal.

Remedies against Disqualification

A director can appeal to the National Company Law Appellate Tribunal (NCLA) in case of disqualification. A stay order can be requested by the director temporarily to dispute the disqualification decision. As in the act of companies, an order to disqualify the director does not take place until 30 days have elapsed since its passing. Whenever one appeals ,the individual can continue being a director for the period of seven days. During the specified time one can file their annual returns to avoid and stay the disqualification order.

There is no procedure to show the disqualified directors. There re-election can only occur only after the 5years period has elapsed.

For more details visit company vakil 

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