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.