Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

164(2) director disqualify

CA.Narasimha Rao.Dontineni (Team Leader) (28 Points)

24 April 2017

ABC company has failed to repay the debentures/interest on debentures for a period of more than one year. As a debenture holder of the company i wanted to know the following: 1. Whether all the directors automatically become disqualified after the expiry of one year by virtue of this provision 2. Whether this above section applicable only if the company fails to file DIR-9 to the register 3. Whether lender is required to write to ROC/SEBI/Exchanges for invocation of this provision 4. Can lender write to company directly informing the implication under Sec 164(2) where their directors disqualified under this section Please clarify

Reply
Follow
Share

3 Replies

Sudhir Todkar (CS Professional) (1021 Points)
Replied 24 April 2017

Dear Sir,

As per section 164(2) of the companies act 2013 if any Director HAD or HAS BEEN fail to repay it's DEPOSIT/DEBENTURES/DIVIDEND OR INTEREST there on due date for ONE Year or MORE.

All Directors of that company will be disqualified and cannot be appointed or reappointment in that company or in anyother company for 5 years from such default.

Director is required to inform to company about his disqualification in FORM DIR 8 before hi is appointed or reappointed

Company shall file DIR 9 to registrar and furnish names and address of all Directors within 30 days from failure

Statutory auditor is required to state in his report if any Director disqualify under 164

DIR 10 shall file for removal of disqualification of Directors.

As foresaid above all such information shall be made by company.

Thank you

CA.Narasimha Rao.Dontineni (Team Leader) (28 Points)
Replied 25 April 2017

Thank You sir,

But the above company's audit report is silent on this issue and how to know whether company has filed DIR-9 or not.

Please share

Jatin Bajaj (CS) (2928 Points)
Replied 25 April 2017

As per section 164(2) of the Companies Act 2013, if the Company fails to repay the deposit accepted by directoprs or pay the interest thereon or to reedem any debentures on the due date or pay interest thereon or pay any dividend declared and such failure to pay or reedem continues for one year or more , then such Director becomes disqualified and shall not be appointed in the same company or any other company within the period of 5 years from the date the Company fails to do seo.

For Example : if the maturity date of repayment of deposit is 20th March 2017, and if Company fails to do so , then Company shall file DIR 9 , within 30 days , i.e. maximum by 19th April 2017 to avoid disqualification. but if company does not file DIR 9 within that period , then Director becomes disqualified and the Director would come under the category of officer in default.

After filing DIR 9 , Company shall immediately file application for removal of Disqualification of Director in Form DIR 10