Section 164 of the Companies Act, 2013
Section 164 of the Companies Act, 2013 – Disqualifications for Appointment of Director
📘 Overview:
Section 164 lays down the circumstances under which a person is disqualified from being appointed as a director in a company.
✅ Key Provisions:
1. Personal Disqualifications [Section 164(1)]:
A person shall not be eligible to be appointed as a director if:
💳 Declared unsound mind by a competent court
🛑 Undischarged insolvent
🧾 Applied for insolvency, and application is pending
👮♂️ Convicted of an offence involving moral turpitude or otherwise, and sentenced to ≥ 6 months
Disqualified for 5 years from the date of release
Permanent disqualification if convicted and sentenced to ≥ 7 years
🧾 Court/Tribunal order disqualifies him
🕵️♂️ Has not paid calls on shares held for 6 months
🧾 Convicted of offence under Section 188 (Related Party Transactions)
✍️ Failed to comply with provisions related to:
DIN (Director Identification Number)
Section 152, etc.
2. Company-Related Disqualifications [Section 164(2)]:
A person shall also not be eligible to be reappointed as a director of a company or appointed in any other company for 5 years, if the company:
❌ Has not filed financial statements or annual returns for 3 continuous financial years
💸 Has failed to repay deposits, interest thereon, or redeem debentures, or pay declared dividend for 1 year or more
⚠️ If a person is a director in such a defaulting company, they are disqualified for 5 years.
3. Exemption [Proviso to Section 164(2)]:
The disqualification under Section 164(2) does not apply to government companies.
⛔ Effect of Disqualification [Linked to Section 167]:
If a sitting director becomes disqualified under Section 164, they must vacate their office in all companies, except in the defaulting company.
📝 Important Notes:
MCA has periodically released lists of disqualified directors based on non-filing defaults.
Companies must check the director's DIN status and past compliance history before appointment.
🎯 Objective:
To ensure that only responsible and compliant individuals manage the affairs of companies, thereby enhancing corporate governance and accountability.
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