Disqualifications for Appointment of Director

Disqualification of Director: Section 164 contain the conditions in which a director can be a disqualified as a director. Disqualification of director means restricting a person from becoming a director of the company or determining the conditions in which he cannot be appointed as director.

Reason of disqualification can be two

As per Section 164(1) a person shall not be eligible for appointment as a director, if-

(a) He is of unsound mind and been declared by the competent court.

(b) He is an undischarged insolvent.

(c) He applied and his application is pending for adjudication as an insolvent.

(d) He has been convicted in any offence involving moral turpitude or otherwise and Sentenced to imprisonment for not less than 6 months and a period of 5years has not elapsed from the date of expiry of sentence as specified.

Provided that if a person has been convicted of any offence and sentenced to imprisonment for more than 7 years then he shall not be eligible to be appointed as a director in any of the company.

(e) Court or tribunal passed an order disqualifying him for appointment as a director and the order is in force.

(f) Not paid any calls amount made by the company for shares held by him, whether alone or jointly with others, and 6 months have elapsed from the date fixed for the payment of call amount;

(g) He has been convicted for offence of related party transactions (RPT) under Section 188 at any time during the last preceding 5 year.

(h) He has not complied with section 152(3) of Companies Act, 2013.

(i) If he is a director in more than 20 companies including any Alternative Directorship.

Section 164(2) also provides that no person who is or has director of a company which –

(a) Has not filed the financial statements or the annual returns for any continuous period of 3 financial years; or

(b) Has failed to redeem any debentures on the due date or pay interest thereon or repay the deposits accepted by it or pay interest thereon and the failure continues for 1 year or more, shall be eligible to be appointed in other company or re-appointed as a director of that company for a period of 5 years from the date on which said company fails to do so.