If the Insolvency Service believes it is in the public interest, it will make an application to the court for a disqualification order. The Registrar of Companies is responsible for maintaining the records of companies and monitoring compliance with the Companies Act. The ROC may initiate proceedings for disqualification of directors if there is a violation of the Act. There is a restriction on the number of directorships a person can hold under company law. A person cannot hold directorships in more than 20 companies simultaneously.
A new clause has been added by the Ministry of Laws and Justice vide an ordinance dated 2nd November 2018 adding to the criteria leading to the disqualification of a Director. Private Companies may by its articles provide for any disqualification for appointment as a director in addition to those specified in sub-sections (1) and (2). After an investigation is conducted, the relevant body may decide to close a company and/or disqualify directors, in addition to potentially carrying out a criminal investigation.
- In addition, a disqualified director cannot be reappointed to the same or any other company for five years subsequent to the date of disqualification, severely limiting their career scope in corporate circles.
- It is important to note that these remedies are not always available or effective, and that prevention is the best strategy for avoiding director disqualification.
- This register serves as a tool for keeping shareholders and other stakeholders informed about potential conflicts of interest that Directors may have with the company’s business transactions, enhancing overall corporate governance.
- Remember, the key to safeguarding your position and your company’s future lies in transparency, regular audits, and a steadfast commitment to ethical governance.
Exemption to Govt Companies G.S.R. 463(E) dated 05/06/2015
The Companies Act, 2013 has tightened the laws regarding the appointment of Directors keeping in view the public interest in the recent amendment. It has also started publishing the name of the Directors on the MCA website to make sure that no disqualified director can be appointed during the 5 years of his termination period. Disqualified directors should contact the Insolvency Service for more information and seek legal advice before applying to the court. Understanding these disqualifications helps aspiring directors assess their eligibility and take necessary steps to maintain their qualification status. It also emphasizes the importance of maintaining high ethical standards, managing personal finances responsibly, and fulfilling all legal obligations.
TAXATION
Section 2(10) of the Companies Act 2013 defined that “Board of Directors” or “Board”, in relation to a company, means the collective body of the directors of the company. Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Disqualification of directors is managed by Section 164 of the Companies Act. Section 164 disqualifies a director either for his own default or for default of the company in which he is a director.
If a director is disqualified, there disqualification of directors are limited remedies available to them. Director disqualification can have significant consequences for the individual and the company they were involved in. A company is generally managed by many directors who can collectively form the Board of Directors.
Related Lawyers
The disqualification doesn’t just affect the individual; it can impact the company’s operations, especially if the disqualified person held key positions or possessed critical knowledge. Companies should have succession plans and ensure adequate documentation to minimize disruption when disqualifications occur. When disqualification occurs, the affected individual must immediately cease acting as a director. The company must update its records and file necessary forms with the Registrar of Companies. Continuing to act as a director while disqualified can result in additional penalties and legal complications.
Administration is akin to calling in a rescue team to salvage what they can. Receivership, while less common now, is like a more targeted rescue, concerning specific assets. Section 164 of the Companies Act, 2013 also provides provisions for appeal against the disqualification order. Catherine Doran, barrister of Radcliffe Chambers regularly acted for the Secretary of State and Official Receiver in disqualification claims against directors when she was on HM Attorney General’s Panel.
Remedies against the Disqualifications
- A disqualified director needs to vacate all directorships except that of the company at which the disqualification took place under Section 164(2).
- Directors who incur disqualifications outlined in section 164 of the Companies Act, 2013 may be compelled to vacate their office due to directors’ personal disqualifications, affecting their ability to continue serving as directors.
- Clear can also help you in getting your business registered for Goods & Services Tax Law.
- You can be banned (‘disqualified’) from being a company director if you do not meet your legal responsibilities.
- Directors must ensure that they act in accordance with their legal and regulatory obligations, and seek professional advice if they are unsure of their responsibilities or obligations.
You can also be banned from being a company director if you’re subject to director disqualification sanctions. You can be banned (‘disqualified’) from being a company director if you do not meet your legal responsibilities. Above criteria for disqualification apply to all companies, be it private companies, one-person companies, small companies and public companies (whether listed or not). It may happen that all the directors of a company get disqualified by virtue of default(s) committed by that company. In such a scenario, promoters of a company will appoint the required number of directors till the time new directors are not appointed by shareholders in a general meeting. Where a person is appointed as a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment.
Maintain a tight ship with good governance, and you’ll significantly lower the odds of facing director disqualification due to insolvency or bankruptcy. If your company’s struggling to keep its financial head above water, it’s a bit like sailing in stormy weather. You must navigate carefully; wrongful trading or continuing to do business when your company is sinking into insolvency can disqualify you as a director. It’s about knowing when to call for help – seeking legitimate debt resolution methods rather than going full steam ahead into the storm. Imagine wearing a false mask to a party—only this time, the party is your company, and the consequences are not just embarrassment, but potential disqualification from your position.
It is also possible that some of the pages linked may become inactive after the lapse of a period of time. The materials provided herein are solely for educational and informational purposes. No attorney/professional-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for professional or legal advice. The ripples of this discussion extend beyond legal mandates; they are a reminder of the ethical bedrock required for the flourishing of companies and by extension, economies. Directors carry not just statutory obligations but the mantle of corporate stewardship — a role significant for the future of commerce and industry in India and beyond.
A director is officially removed once the company updates the particulars of the new director in Accounting and Corporate Regulatory Authority (ACRA) via BizFile+. According to section 152(1) of the CA, the removal of a director shall not take effect until his successor has been appointed. The shareholders must give 14 days’ written notice, although this requirement may be waived if agreed by more than 95% of the votes. Aside from The Insolvency Service, other bodies in the UK can apply to have you disqualified under certain circumstances, e.g. Until recently, the MCA has not strictly enforced this provision of the Companies Act.
Violating this provision may result in penalties ranging from Rs. 1 lakh to Rs. 5 lakhs, emphasisingthe importance of maintaining ethical and transparent corporate governance. In sum, these disclosure and declaration requirements promote transparency and act as safeguards to prevent potential conflicts of interest and maintain the integrity of directorships. They enable stakeholders to make informed decisions and ensure a company’s board’s smooth and ethical functioning.