Director Disqualifications:
Under company law, a director can be disqualified for any of the following reasons:
- He is of an unsound mind and is declared so by the court.
- He is insolvent.
- He is in the process of declaring insolvency and his application is pending.
- He has been convicted by a court of any offence (whether or not involving moral turpitude) and has been imprisoned for at least six months. However, if a person has been convicted of any offence and has served a period of seven years or more, he shall not be eligible to be appointed as a director in any company.
- If an order has been passed disqualifying him from being appointed as a director by a court or Tribunal.
- He has not paid any calls with respect to any shares of the company held by him, whether alone or jointly with others, and a period of six months has elapsed from the last day fixed for the payment of the call.
- He has been convicted of offences dealing with related party transactions at any time during the last preceding five years.
- He has failed to acquire a Director Identification Number.
Effects of Disqualification:
Once disqualified, a person is ineligible for directorship in the affected company or any other for five years. The Ministry of Corporate Affairs strictly enforces these provisions, publishing disqualified directors’ names on the government website.
Remedies against Disqualification:
In case of disqualification, directors can appeal to the National Company Law Appellate Tribunal (NCLAT) and seek a temporary stay order. Under the Companies Act 2013, the disqualification order takes effect after 30 days, providing a window for appeal. During this period, the director can file annual returns to delay disqualification enforcement. However, there’s no process for the reappointment of a disqualified director; reappointment is possible only after a five-year lapse from disqualification.
