Relief to Disqualified Directors Under the Companies Act, 2013

In the process of cleaning up the financial sphere, Ministry of Corporate Affairs (MCA) in 2017 deregistered around 2.2 lakh companies and subsequently, disqualified 3.4 lakh directors.

Most of these companies were struck off owing to the non-compliance of financial statements and annual reports; provisions mentioned under Section 164 (2)A of the Companies Act, 2013.

Section 164 read along with Section 167, lead to the automatic disqualification of the directors of such companies for five years.

If you are one of such a disqualified director, then looking for viable solutions for removal of director disqualification and trying to save your career from coming to a halt, must be your first priority.

Muds (disqualified directors)

Remedial Measures For Removal Of Disqualification Of Director!

As the disqualification has occurred due to the default of the company in which one is a director, hence, the solution to it is also tied up with the fate of the company.

Due to the sheer numbers of aggrieved parties, a lot of hue and cry was made and the government took cognizance of it by opening a window called Condonation of Delay Scheme. This was open for a limited period and many companies took its benefit and applied. The directors of those companies that were able to resume their status, applied to the concerned ROC and had their DIN activated.

Other companies took to provision given under Section 252 of the Companies Act, 2013 and appeal for restoration was made to the National Company Law Tribunal.

The Process of Applying To The Tribunal

An aggrieved company or its member or creditor or workman can apply to the Tribunal by the way of filing an application within three years of the name being struck off.

Overdue documents have to be submitted along with other documents, affidavit verified, and stipulated fee submitted. The Tribunal will then hear the case as per the specified act. In the end, if the Tribunal is satisfied by the documents and evidence, it will revive the company.

Once the company is restored, the Director(s) can apply to the concerned ROC for removal of their disqualification.

Dead End For Disqualified Directors

As a major set back to the directors thus disqualified is that since their disqualification occurred due to the default committed by the company, therefore, the remedy also is tied up to the revival of the company and not the directors.

The Companies Act, 2013, provides no remedial measures for such directors. So, in circumstances where the struck off the company is not interested in restoring themselves, the directors have no measure to remove their disqualification. The Act specifies that the directors can apply for reactivation of their DIN only by the end of 5 year period.

The arbitrariness and ambiguity of such conditions have created a lot of dissatisfaction among the directors who have been caught unawares.

Muds (isqualified Directors)

Hope For Disqualified Directors

The only restorative measure for such directors is to file a Writ Petition in the concerned High Court. Since the publication of the list of disqualified directors, many of the directors have taken this step.

The Courts have taken into account the ambiguities prevailing in the Act and have in many cases given a reprieve to the directors by putting a stay on the list or quashing it altogether.

Take Wise Counsel And Revive Your Career

If you have not initiated any remedial step to activate your DIN, then do it at the earliest!

Contact MUDS for consultation of what route to select and let their vast experience help you in coming out of this exile without any further delay!

“Every problem has a solution, it is only a matter of finding, understanding and pursuing it at the right time!”
-Shweta Gupta, Founder and CEO, MUDS

By | 2019-04-18T11:50:51+00:00 April 11th, 2019|Removal of Disqualification of Directors|0 Comments

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