Over the last few years, MCA or Ministry of Corporate Affairs has disqualified many of the Directors for not performing or meeting the compliance i.e. Rules or regulations mentioned under Companies Act, 2013. However, you can obtain your position back as the Director of the Company. MCA has also deactivated its Director Identification number, so to revive back there is one scheme which is introduced by the MCA i.e. “ Condonation of Delay Scheme”, that provides relief to the Directors by aiding them with the provisions to remove Director Disqualification.
Under company law, a director can be disqualified for any of the following reason:
- He is of an unsound mind and is declared so by the court.
- He is insolvent.
- He is in the process of declaring insolvency and his application is pending.
- He has been convicted by a court of any offence (whether or not involving moral turpitude) and has been imprisoned for at least six months. However, if a person has been convicted of any offence and has served a period of seven years or more, he shall not be eligible to be appointed as a director in any company.
- If an order has been passed disqualifying him of being appointed as a director by a court or Tribunal.
- He has not paid any calls with respect to any shares of the company held by him, whether alone or jointly with others, and a period of six months has elapsed from the last day fixed for the payment of the call.
- He has been convicted of offences dealing with related party transactions at any time during the last preceding five years.
- He has failed to acquire a Director Identification Number.
Once disqualified, a person is not eligible for being appointed as Director of that company or any other company. This restriction is imposed for a period of five years or as the case may be. Since the year 2017, the Ministry of Corporate Affairs (MCA) has been strictly enforcing these provisions of the Companies Act. It has recently published the names of the disqualified Directors on the government website.
In case of disqualification, a director can appeal to the National Company Law Appellate Tribunal (NCLAT). He/she can temporarily ask for a stay order. Under the Companies Act 2013, an order disqualifying a Director does not take effect within the next 30 days of it being passed. As soon as an appeal is initiated, the disqualified person will still continue to be a director for the next seven days. Within this period, he can file his annual returns to stay the order of disqualification. However, there exists no procedure to reappoint a disqualified director. He can only be reappointed after a period of five years has elapsed from the date of disqualification.
Director disqualification removal process
- Drafting a written application
- Filing the Director's disqualification matter with the High court.
- The Advocates appear before the high court regarding Director disqualification.
- Obtaining the final order from the High court.
- Filing all the financial and annual compliances with the Registrar of companies.
- Activation of DIN and removal of director disqualification.
- There is one thing to remember that there is a way to remove Director disqualification
- Without the condonation of delay scheme (CODS). However CODS to make the process quite streamlined.
- Full Assistance in respect of the below mentioned
- Drafting of Writ Petition
- Filing of application with the High Court
- Appearances by Advocates and pleadings for the same
- Filing order of High Court and pending compliance documents with Respective ROC