Remove disqualification of directors section 164(2)

REMEDY TO AVOID AND REMOVE DISQUALIFICATION OF THE DIRECTORS UNDER SECTION 164 (2)

Disqualifications for the appointment of Director:

(1) A person shall not be eligible for appointment as a director of a company, if–

(a) He is of unsound mind and stands so declared by a competent court;

(b) He is an undischarged insolvent;

(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence:

Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;

(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;

(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or

(h) he has not complied with sub-section (3) of section 152.

(2) No person who is or has been a director of a company which–

(a) has not filed financial statements or annual returns for any continuous period of three financial years; or

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more,

shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

(3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2):

Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall not take effect–

for thirty days from the date of conviction or order of disqualification; (12th September, 2017)

https://pib.nic.in/newsite/PrintRelease.aspx?relid=170719

(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or

(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.

Further Rule 14(1) of Companies ( Appointment & Qualification of Directors ) Rules 2014 says that every Director of the Company Shall inform to the Company concerned about his disqualification under Sub section 2 of section 164, in form DIR 8.

So, according to this we can appoint a new director in those companies whose directors has been disqualified under this section, along with filing of DIR-10 for the removal of disqualification.

By doing this the disqualification of the directors will not take effect until expiry of seven days from the date on which such appeal or petition is disposed off; or where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.

Regards,

CS DILIP KUMAR CHOUDHARY

FORM ‘DIR-10’

FORM OF APPLICATION FOR REMOVAL OF DISQUALIFICATION OF DIRECTORS

[Pursuant to Section 164(2) read with rule 14(5) of Companies (Appointment and Qualification of Directors) Rules, 2014]

Registration No. of Company ______________

Nominal Capital Rs._____________

Paid-up Capital Rs. _____________

Name of Company__________________________

Address of its Registered Office____________________

Grounds under which director(s) are disqualified ____________________

Date of disqualification ________________