A company is generally managed by a bunch of people known as directors who collectively form the Board of Directors. They are responsible for making strategic decisions that affect the overall functioning of the business entity. It is imperative that the directors act in good faith and work towards the benefit of the shareholders and the company that they represent.
A director is expected to perform his tasks and duties with diligence and utmost care and integrity, failing which he/she could be removed or ousted. The year 2017 saw a massive step taken in the right direction by the government as they disqualified over 3,00,000 persons holding directorship positions as they failed to comply with regulatory requirements that were set by the Companies Act, 2013.
The Companies Act, 2013 lays down the grounds upon which a director may attract disqualification. Section 164 of the Companies Act, 2013 deals with the same, presented here in a condensed manner:-
With regard to this particular provision, non-eligibility for directorship will be for a period of five years from the date of such default, be it in that particular company or any other company.
Ever since the mass disqualification rally of 2017, the Ministry of Corporate Affairs (“MCA”) has been vigilant in keeping tabs on the directors with regard to their regulatory and statutory compliances. Depending on what the grounds for disqualification is in a particular scenario, a person is disqualified either for a period of five years or as the case may be. The names of the directors who are disqualified will be published on the MCA portal. The DIN allotted to that specific director will be deactivated by the Registrar of Companies.
Disqualified directors can make use of a couple of approaches that will be their lifeboats in disguise.
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