MCA had disqualified around 3.09 lakh directors that failed to comply with the regulations stated under section 164(2) and 167(1)(a) of the Act. As a further preventive measure, the authority has blocked DIN of all the disqualified directors. After the action was taken, many aggrieved directors and company came out seeking a solution for the same. As a result of which, the ministry came out with ‘Condonation of Delay Scheme’ wherein it provides a chance to file the necessary documents and safeguard their current position.
Under section 8 of the Act, every registered company of India has to file their financial returns each year with MCA. Under Act 2013, any company or the director of such company has failed to do the same for last 3 years could be disqualified on the same grounds , wherein the company would get the status of ‘Strike off’ from ‘Active’ and for any director, it would lead to its disqualification . CODS was operational from 1st Jan to 30th april under which temporary activation of DIN would take place and he/she can file all the required documents under the scheme. Failing to do so would lead during this period, would lead to disqualification of director for coming 5 years.
If a person —
He/she shall also not be eligible to be re-appointed as a director of that company or any other company for a period of 5 years from the date.
The immediate action to be taken up by the promoters after the disqualification of a director is to file the overdue returns. Hence, once the Directors of a company are disqualified, they would will be barred from filing any outstanding MCA annual returns in order to make the agreement up to date. Thus, the existing Directors are supposed to execute resolutions for the assignment of the new Directors in the organisation. As the existing Directors are disqualified or not eligible, they are also barred from digitally signing the new director appointment application for filing with MCA.
To avoid the same, the Directors together with a Professional would have to advance to the concerned Registrar of Companies for the appointment of Director through the MCA back end.
The Directors of defaulting company can file the following forms relating to annual return and appointment of Auditor:
DIN or Director Identification Number is a unique number allocated to both existing director or would be director of any existing company incorporated under section 266A and 266G of the Act,2006. The idea of DIN was to create of all the directors on individual basis so that any case of any wrongdoing be prevented and if any such is done, it could be tracked within proper time frame.
There is no procedure till date for the MCA to make a Disqualified Director, a Director again afore the end of the 5 year period. But, all collaborators are still waiting for the MCA to disclose and declare a process to remove the disqualification once the filing of the necessary compliance and payment of a penalty is done.
Elimination of a director is not always the easiest process but it is at times mandatory to protect the company’s interests. The most critical thing for the shareholders as well as directors to remember when trying to discharge a director, is that they are handling a person, and thus, there is always the possibility of a conflict.
It can be wrapped up that as there appears to be no remedy feasible as per the Companies Act, 2013, but, a Writ Petition can be made by the grieving director under Article 226 of our Constitution in the awol of any backup cure accessible.
It is worth thinking about which path would be that of least resistance, whether it be shareholders resolving to remove them, applying to ASIC or discussing the issues with the director. Making records of concerns and the process is a simple way to protect against risk and maintain transparency.
Thus, it can be stated that once a director is ineligible u/s 164(2) he shall continue to be disqualified for FIVE financial years. In the Active Companies promoters have to appoint new directors for smooth working of the Company.
One can think that in case, any director of a struck off Company wants to avail the benefit of CODS-2018 or want to remove its disqualification can file a writ petition in Hon’ble High Court for the same.
If for a company any such case arise, either a Promoter or the Ministry of Corporate Affairs (only in absence of a promoter) shall appoint required number of directors till the time directors are not appointed in the general meeting.
The individual will have to make an application to Registrar of Companies in form of DIR-10 as per rule 14(5) of the Companies Act asking for removal of his/her name from the list. But such application can be made only after completion of five years.
Irrespective of whether a disqualified director has disqualified under section 164 of the Act of vacated the office under section 167 of the Act, he/she can still continue to be shareholder of the company.
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