Disqualification of directors [Section 164]

Section 164(1): A person shall not be capable of being appointed as a director of a

company, if:

(a) He is of unsound mind and stands so declared by a competent court.

(b) He is an undischarged insolvent (undischarged insolvent is one who is unable to

discharge his debts of at least 25 paisa in a rupee)

(c) He has applied to be adjudicated as insolvent and his application is pending.

(d) He has been convicted by a court for any offence whether involving moral

turpitude or otherwise and sentenced to imprisonment for not less than 6 months,

and a period of 5 years has not elapsed from the date of expiry of sentence (moral

turpitude refers to conduct being contrary to honesty or opposed to good moral or

is unethical). If a person has been convicted of any offence and sentenced to

imprisonment for a period of 7 years or more, he shall not be eligible to be

appointed as a director in any company.

(e) An order disqualifying him for appointment as a director has been passed by a

court or Tribunal and the order is in force

(f) He has not paid any call money in respect of shares of the company held by him,

whether individually or jointly and 6 months have elapsed from the last day fixed

for payment of call.

(g) He has been convicted of the offence dealing with related party transactions under

section 188 at any time during the last preceding 5 years.

(h) He has not complied with section 152(3) (i.e., if DIN is not allotted u/s 154)

Proviso to Section 164(1): Disqualification referred to in clauses (d), (e), (g) of

section 164(1) shall not take effect for 30 days from date of conviction or order since,

he can seek appeal. Where an appeal or petition is preferred within 30 days, then it

shall take effect after 7 days of disposal of such appeal. If further appeal is made,

within 7 days, then it shall not take effect up to disposal of case.

Provided that the disqualifications referred to in clauses (d), (e) and (g) shall continue to

apply even if the appeal or petition has been filed against the order of conviction or

disqualification. (As per Companies Amendment Act, 2017)

2. Section 164(2): A person shall not be eligible to be re-appointed as a director in that

company or appointed in any other company for a period of 5 years from the date on

which the company:

(a) Has not filed financial statements or annual returns for any continuous period of 3

financial years; or

(b) Has failed to pay or redeemed for 1 year or more the following:

 To repay the deposits accepted by it or


 Pay interest thereon or

 To redeem any debentures on the due date or

 Pay interest due thereon or

 Pay any dividend declared

Notes

1. New Company - Appointment – 164(2) - Director is disqualified from seeking

appointment in any new company

2. Directorship in existing companies:

a. Continue in all existing companies

b. Vacate office from all existing companies except the defaulting companies

3. Can be appointed but will be disqualified for 5 years from seeking appointment in

any other company after 6 months of his appointment in defaulting company if

default is not rectified within 6 months

4. As per SEBI, Listed Companies shall ensure that the director is not debarred from

holding the office of director by virtue of any SEBI order or any other authority

3. Section 164(3): A private company can through its articles provide for

disqualification on any grounds in addition to those specified in section 164(1) & (2).

Therefore, Public Company cannot provide for disqualification on any other grounds.

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