Section 243 of the Companies Act, 2013
Section 243 of the Companies Act, 2013 lays down the consequences of termination or modification of certain agreements upon the termination of managerial personnel following an investigation under Section 242.
📜 Section 243 – Consequences of Termination or Modification of Certain Agreements
✅ Key Provisions:
Automatic Termination of Certain Agreements:
When the Tribunal (NCLT), under Section 242, passes an order for:
Termination, setting aside, or modification of any agreement related to the appointment of a managing director, manager, or other director,
then such agreement shall cease to have effect on the date of the Tribunal’s order.
Disqualification from Future Appointments:
The person whose agreement is terminated or who is removed from office under Section 242:
Shall not be eligible to be appointed as a director or in any managerial position in any company for a period of 5 years from the date of the order,
Unless the Tribunal allows otherwise, with recorded reasons.
No Compensation for Loss of Office:
Such a person shall not be entitled to any compensation or damages for the termination of office or loss of office, even if the agreement had provisions for it.
⚖️ Purpose:
To ensure that mismanaged or fraudulent directors removed by the Tribunal cannot:
Claim financial benefits for their removal, or
Take up similar positions in other companies immediately.
🧾 Related Sections:
Section 242 – Powers of Tribunal in cases of oppression/mismanagement.
Section 244 – Who can apply for relief under Section 241.
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