HOW TO BE DEALT WITH THE COMPANIES WHEN ALL THE EXISTING DIRECTORS OF THE COMPANY ARE DISQUALIFIED U/S 164 (2)(A) OF COMPANIES ACT 2013. (or)
How to remove disqualification of directors
Greetings of the day
Recently MCA has taken the very strict step against the companies & its directors for non compliance of Legal Formalities applicable on them. Specially disqualifying the Directors associated with the defaulting company.
Q. What is Disqualification of directors u/s 164 (2) in general Language?
Ans: Any Person who is or has been a director of any company (either Struck off or active company) which has not filed its financial statements or annual returns for any continuous period of three financial years shall not 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.
Q. What are the consequences of Disqualification of directors u/s Section 164 (2) of Companies Act, 2013?
Ans: Section 167(1)(a) directs that the office of a director shall become vacant in case he incurs the disqualification.
As per Section 167 (2) if a person, functions as a director even when he knows that the office of director held by him has become vacant on account of the disqualification, he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.
Q. What is the effect of Disqualification of directors u/s Section 164 (2) of Companies Act, 2013?
Ans: Any Person who becomes disqualified under section 164 (2):
- The DIN & DSC of that Person has been blocked by MCA For filing all forms with MCA.
- For Defaulting Companies using DSC & DIN of Disqualified directors.
- For Non Defaulting Companies using DSC & DIN of Disqualified directors.
- Any document or application filed by disqualified director with MCA shall be summarily rejected.
Q. What Steps/measures to be taken for Removal of Disqualification of Directors?
Ans: Currently, there is no such provision in the law for removal of disqualification of director before the tenure of 5 years. Ministry is working on the same and we are looking for this major change in the provisions and waiting for the relief and hoping for the availability of some remedy soon.
How as per Rule 14 (5) of the Companies (Appointment and Qualification of Directors) Rules, 2014, the director shall make an application in form DIR – 10 to the RoC for removal of disqualification and the said application can be made only at the end of the tenure of five years post his disqualification.
Q. How the Company will continue in case all the existing director of the company are disqualified?
Ans: The MCA has issued a way for the companies in which all the existing directors of the Company are disqualified i.e. by way of BACKEND UPDATION OF DIN BY ROC.
The MCA has issued a clarification that if all the existing directors of the company got disqualified and office of directors became vacant, in such case:
- The Power of the company came in the hands of Shareholders/promoters of the company.
- The Shareholders/promoters of the company can call for EGM and appoint some new person as director of the company to fill the casual vacancy in the company.
Hope this is article will help you or your clients and clarified the conceptual and procedural Part.
DISCLAIMER: The entire contents have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all or any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. Reader should seek appropriate counsel for their own situation. I shall not be held liable for any of the consequences directly or indirectly.
Any other suggestions /opinions are welcomed.
Regards
CS Megha Sharan (Company Secretary in Practice)
Author: Ezzus India
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