22 March 2008
MR.MADHAVAN, SUBSEC.3 OF SEC 274 STATES THAT A PVT. COMPANY WHICH IS NOT A SUBSIDIARY OF A PUBLIC CO.MAY BY ITS ARTICLES PROVIDE THAT A PERSON SHALL BE DISQUALIFIED FOR APPNTMNT AS A DIRECTOR ON ANY GROUNDS IN ADDITION TO THOSE SPECIFIED IN SUB SEC. (1) . IN ADDITION ..MEANS ALL GROUNDS OF SUB SEC. 1 ARE APPLICABLE TO PVT. COMPANY ALSO (NOT A SUBSIDIARY OF PUBLIC CO.).AND THAT A PVT. CO MAY ADD MORE GROUNDS OF DISQUALIFAICATION . SO SEC 274 IN ALL ITS SUB SEC. AND CLAUSES APPLY TO PVT. CO. THIS IS WHAT A PLAIN READING OF THE SEC. STATES. THANKS, R.V.RAO
I reproduce first line of Sub-Section 1 of Section 274.
A person shall not be capable of being appointed director of a company, if:
Your doubt is whether Section 274(1)(g) is applicable to Private Company. Yes it is but little differently. Lets take one example, if Mr.A is director of ABC Ltd and ABC Private Limited and XYZ Ltd. If ABC Ltd defulted in filing annual return and fail to pay interest on debenture or deposit. Than in that case Mr.A will be disqualified to act as the Director of ABC Ltd and XYZ Ltd. However, it can continue to act as a Director in XYZ Private Limited.
So Section 274(1)(g) applicable to Private Limited Company but on the event failure mentioned in sub clause (g) of Sub-Section(1) of Section 274 in the case of directors of Private Limited Company, they can continue to act as a Director, subject to contrary provision contained in Artciles of Association of the Company.
In view of the above, the Directors of Private Limtied Company also need to give Form DDA every year before 31st March, stating that they are not disqulified to act as Director under section 274(1)(g).
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