Section 274 of Companies Act, 1956 describes the disqualification of a person for appointment as a director in a company. The above mentioned section is replaced by section 164 of Companies Act, 2013 and it make required changes and now all such disqualification will covers private company as well.
The article analyses the provision of section 164 of Companies Act, 2013 and what differences is it make in existing provisions of companies act, 1956.
Disqualification under Companies Act, 2013-
Section 164 of Companies Act, 2013 contains the provision related to Disqualification of Director, which is produced as under: – (text in red shows the new provisions inserted or changes made in existing provisions).
(1) A person shall not be eligible for appointment 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;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence.
(Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven 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 calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 (Related Party Transaction) at any time during the last preceding five years; or
(h) he has not complied with sub-section (3) of section 152. (DIN No.)
(2) No person who is or has been a director of a company which—
(a) has not filed financial statements, or annual returns for any continuous period of three financial years; or
(b) has failed 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 and such failure to pay or redeem continues for one year or more,
shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
(3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2):
Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section shall not take effect—
(i) for thirty days from the date of conviction or order of disqualification;
(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or
(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.
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