Who can be a director

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Divya

Divya (Querist)
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28 October 2013 Sir/Mam , What are the qualifications to be a Director of a company?

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013 Hi

The Companies Act has not prescribed any qualification for appointment as a director in a company. Further there is no age limit under the Act except, in case of a managing or whole-time director, namely, not less than 25 years and not more than 70 years of age. Therefore, any individual person can become a director whatever may be his qualification and age.

However, it has been provided under section 274 of the Act, that a person shall not be capable of being appointed as a director, if he has certain disqualifications.

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013
DISQUALIFICATIONS OF DIRECTORS
Section 274(1) of the Companies Act, 1956 provides that a person shall not be capable of being appointed as a director in a public limited or private limited company if:—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than 6 months, and a period of five years has not been elapsed from the date of expiry of the sentence;
(e) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for payment of the call; or
(f) an order disqualifying him for appointment as director has been passed by a Court or the Tribunal in pursuance of section 203 of the Act and is in force, unless the leave of the Court or the Tribunal has been obtained for his appointment in pursuance of that section;
(g) such person is already a director in a public company which,—
(A) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after 1-4-1999; or
(B) has failed to repay its deposit or interest thereon on due or redeem its debentures on due date or pay dividend and such failure continues for one year or more:
Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of 5 years from the date on which such public company in which he is a director failed to file annual accounts and annual returns under sub-section (A) or has failed to repay its deposit or interest or redeem its debentures on due date or pay dividend referred to in clause (B).
Section 274(2) provides that the Central Government may by notification in the Official Gazette remove disqualification of conviction by a court of any offence involving moral turpitude and sentenced to imprisonment for at least six months and a period of five years has not elapsed and disqualification due to non-payment of call as per clauses (d) and (e) of section 274(1), respectively.
No other body or authority, i.e. court of law or shareholders has powers to remove disqualifications of director except the limited powers of granting dispensation from the disqualifications specified above vested on the Central Government.

Provision of section 274(1)(g) does not make the distinction between the Government nominated directors and other directors. [Snowcem India Ltd. v. Union of India [2005] 60 SCL 50 (Bom.)]

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013
Private company may provide for additional disqualifications:

Section 274(3) states that a private company which is not a subsidiary of a public company, may by its Articles, provide that a person shall be disqualified for appointment as a director on any grounds in addition to those specified in section 274(1). Thus, a private company, which is not a subsidiary of a public company is free to prescribe in its Articles, additional disqualifications for directors. A person suffering from these could not be appointed as its director.

Neither a public company nor a private company can dispense with or relax any of the statutory disqualifications specified in section 274(1). A limited power of granting dispensation from the disqualifications specified in clauses (d) and (e) of section 274(1) has been vested in the Central Government.

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