Select Your Location
A company is a legal entity that acts through natural persons. The person who acts on the behalf of company is known as Director. In this article we shall look at Disqualification of Directors.
Table of Contents
A Director may be disqualified on the happening of following events:
In addition to the requirements mentioned above, the Companies Act further provides that a person shall not be eligible to be appointed as a Director of any other public company for a period of five (5) years from the date on which the public company, in which he or she is a Director, is in default to file annual accounts and annual returns or is in default to repay its deposits or interest thereon or redeem its debentures on the due date or pay dividends declared.
A private company which is not a subsidiary of a public company can provide for additional grounds for disqualification for the appointment of a person as a Director in addition to those specified in the Companies Act.
Once disqualified, the person shall no more be eligible to be appointed as Director of that company or for that matter any other company. After the year 2017, MCA has strictly enforced these provisions of the Companies Act. It recently published the name of disqualified directors on the government website.
The provision regarding the retirement of directors by rotation is applicable only for a public company. As per the provisions of the said section, 2/3rd of the total number of directors of a public company shall be liable to be retired by rotation. While calculating the 2/3rd of the total number of directors, the Independent Director shall not be counted in the total number.
Shareholders are bestowed with the powers to remove the Directors, as well all know that at the end of the day, directors are answerable to shareholders. Further, Shareholders can also remove a director before the expiry of his tenure, an exception is a case if the director is appointed by Tribunal under the prevention of oppression and mismanagement u/s 242 and if appointed under a principle of proportional representation u/s 163.
A Director can be removed by an ordinary resolution of the general meeting after a special notice has been given, before the expiry of his term of office.
The office of a Director of a public company, or of a private limited company which is a subsidiary of a public company, becomes vacant if he or her:
Also, in such public companies and private companies that are subsidiaries of public companies, if a Director or his or her relative holds an office of profit without the consent of the company, and with such Director’s knowledge, such Director shall be deemed to have vacated his or her office.
In addition to these reasons for the Director’s office becoming vacant, a “pure” private company may prescribe other such reasons in its Articles.
If a person continues to act as a Director, despite knowing that his or her office has become vacant, he shall be punishable with a fine up to five thousand rupees (Rs. 5,000/-) for every day that he or she continues to function and act as such.
The Companies Act is silent with respect to the resignation of Directors. However, in a majority of cases, the Articles provide for Directors to resign. Even in cases where the Articles are silent, there is no absolute bar on Director’s resigning, which becomes effective upon submission of such resignation letter and the filing of the necessary form for such resignation with the Registrar of Companies (whether or not the Board formally accepts the same, unless the Articles provide otherwise). The filing of such resignation related form with Registrar of Companies is an obligation to be discharged by the company in question.
The only exception to the above rule is in the case of Managing, Whole-time and Executive Directors who are employees of the company, and where the terms of their respective service contracts will ordinarily refer to resignations, notice periods and/or compensation in lieu thereof.
Only a Managing Director, a Director holding the office of a Manager and Whole-time Directors can receive compensation for loss of office or consideration for retirement, subject to the conditions specified by the Companies Act.
It may be noted that there is also a provision of appeal for directors in case of disqualification. A director may appeal to the National Company Law Appellate Tribunal.
Read our article:The Procedure and Requirements of Appointment of Nominee Director
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 9 + 9 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
The full form of RTA is Registrar and Transfer Agents. These are firms registered with the Securities and Exchange...
16 Mar, 2023
A registered office of any company is its official address where one can communicate to. It is decided at the time...
06 May, 2020
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!