Tag Archives: Disqualification of Directors

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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