A Director is a person from a group of managers who supervises a particular area of a company. The role of a director is to determine and implement policies and to make decisions. Thousands of Directors have been disqualified in the years 2017 and 2018 all over India, because of the strictness of the Registrar of Companies. Accordingly, in this article, we shall study all the reasons that can lead to a director being disqualified for appointment as director of any company.
•Reasons for disqualification of director:
1. He is of unsound mind and it is declared by the court.
2. Fraudulent trading.
3. He is insolvent or unable to pay the debts.
4. He has applied to be adjudicated and his application is pending.
5. He has convicted by the court of any offense whether it involves or not the moral turpitude and has been sentenced for six months.
6. If the person has been convicted and sentenced for seven years or more, then he is not eligible for being appointed as a director in any company.
7. If an order disqualifying him of being appointed as a director has been passed by a court or Tribunal.
8. He has been convicted of an offense related to party transactions at any time during the last five years.
9. He has not paid any calls with respect to any shares of the company held by him, and a period of six months has elapsed from the day fixed of payment of the call.
10. He has been appointed without Director Identification Number(DIN).
11. He is a director in more than 20 companies violating the limit.
12. Non filling of DIR-3 NYC.
13. He is appointed as a director in a company that has not filed financial statements of annual returns for three financial years.
Some more queries related to the disqualification of director:
•When the order against the director convicting him of offenses is in appeal, the director is continued to be disqualified every if the matter is in appeal once the order is passed against such person by any tribunal, court or any such authority.
Q. What is the remedy for the disqualification of the director?
In case of disqualification, a director can appeal to the National Company Law Appellate Tribunal (NCLAT). In case the director is disqualified due to nonfiling of financial statements and annual returns, then he can file a petition with the high court against the RoCs of respective states against such disqualification.