Tag Archives: Disqualification of Directors

Activation of DIN Post Completion of Disqualification Period


On 26 November 2016, the Ministry of Corporate Affairs came out with its first list of directors disqualified under Section 164(2)(a). The Registrar of Companies, Tamil Nādu, Coimbatore, issued a list with a total of 2042 names with disqualification from 1 November 2017 till 31 October 2022.

From September 2017 onwards, various offices of the Registrar of Companies issued different lists of disqualified directors for period 1 November 2014 to 31 October 2019, 1 November 2015 to 31 October 2020 and 1 November 2016 to 31 October 2021, 1 November 2017 to 31 October 2022. All sets of these lists of directors so disqualified may be found here.

Immediately after that, few directors so disqualified approached High Courts under writ jurisdiction. High Court found disqualifications from 1 November 2014 to 31 October 2019 and from 1 November 2015 to 31 October 2020 invalid as the provision under Section 164(2)(a), introduced in the year 2014, and it has prospective effect only.

MCA deactivated the DIN of directors, so disqualified to implement their disqualification. These DIN so deactivated could not be used for any filing purpose on MCA for the period of disqualification.

There is a lengthy debate on the manner of implementation of this law. I was surprised with the way of quick acceptance of disqualification and wrote this long post here. But, these people know how to bow and run the show.

So, the first effective batch of persons disqualified to be a director completed their disqualification period on 31 October 2021. Now, our mighty directors once again keep mum. There is no automatic removal of disqualification on the practical side. The Government, while deactivating the DIN, forgot to place the automatic activation command in the system. Due to technological and bureaucratic excuses, MCA activated deactivated DIN after delays of 20 more days.

Those who support a violation of the human rights of others do not fight for their own human and legal rights (unless huge money involved). This incident is another fine example.

Now, these directors may again enjoy the tag of director on their business cards. However, they need to check their KYC Compliance status. Directors are clients of MCA. Therefore, MCA needs to know who they are. For this, they should check whether they have complied with the annual KYC requirement. (Un)fortunately, due to ignorance of the law, alienation, or professional advice, most people did not file their KYC documents with MCA. Anyway, such KYC non-compliance secure you from unwanted directorship in a company by fraud on you.

Now, these people, if willing to be directors, should file their KYC Documents with MCA.

This compliance may cost:

  1. Digital Signature Certificates;
  2. Filing Fee; and
  3. Professional Charges.

Connection of Director’s Disqualification to Fraud


Disqualification of directors certainly is a hot topic among professionals practising corporate laws. Irrespectively of popular perception, the list compiled and released by Ministry of Corporate Affairs does not confer any disqualification to any director. These directors were already disqualified. In a serious violation, many of these directors might have failed to communicate about their disqualification to companies appointing or reappointing them after the actual date of disqualification. Such failure has penal consequences. This blog post will discuss serious consequences of the failure of compliance with law and procedures after incurring disqualification by a director.

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No Director in Company!! #APPOINT!!


“Disqualified directors are not directors in any Company”, this is fact under Section 164 and 167. In another word, A Company with all directors disqualified under Section 164 and 167 has no director at all. Such companies need new a set of directors immediately. The Companies Act, 2013 presume two situations where a company may be without Directors. We will discuss these two situations here.

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Quick Acceptance of Disqualification


The government of India in its crackdown against illicit money and money laundering marked 209,032 for removal of names from its register of companies as shell companies. It also disqualified about 200,000 directors. As happens with most bureaucratic exercises in India, present exercise also raised more questions than it answers. There is no definition of shell companies in Indian law. The term shell companies used widely to denote companies used as a vehicle for money laundering or criminal activities. The term itself denotes that main culprit may be someone else.

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DISQUALIFICATION OF DIRECTORS


Section 164 of the Companies Act 2013, as discussed earlier here; deal with Disqualification for appointment of directors. Sub – section (1) of Section 164 list disqualifications of directors for appointment as a director of a company. The Appointment shall include reappointment but not continuation to be in office. Disqualification in this sub – section is general in nature and shall apply for an appointment and reappointment of such director in a company.

Sub – section (2) of Section 164 adds two disqualifications which are applicable to reappointment of director in same company and appointment in any other company for a period of five years from the date on which the said company defaulted and disqualification arises.

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APPOINTMENT AND QUALIFICATION OF DIRECTOR


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

I discussed in my last post that it is first time that concept of “Key Managerial Personnel” has been introduced in India. Hopefully, present Companies Bill will change status of Corporate Governance in India. The qualified Directors and transparency in appointment of directors is single most important key for success of public corporate and corporate governance. As I discussed, appointment of “Key Managerial Personnel” is discussed in Section 203 but specific provisions of Chapter XI should be taken care of in case of appointment of Directors as they are specific provisions for them. Chapter XI consists of 23 Section from Section 149 to Section 172.

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