When is a director disqualified?

Which personal grounds apply?

Section 164(1) lists the personal bars. The person has been declared of unsound mind by a court, and the finding stands. The person is an undischarged insolvent. An application to be adjudicated insolvent is pending. The person has been convicted of an offence and sentenced to imprisonment for at least six months, and five years have not passed since the sentence expired. A sentence of seven years or more bars appointment in any company.

A court or Tribunal order that disqualifies the person bars appointment while that order is in force. Calls on shares have stayed unpaid for six months from the last date fixed for payment. A conviction for the related-party offence in section 188, during the preceding five years, is also a bar. So is the absence of a director identification number.

Which company defaults count?

Section 164(2) applies to a person who is or was a director of a company that has not filed financial statements or annual returns for any continuous period of three financial years. It also applies where the company has failed to repay a deposit or the interest on it, to redeem a debenture or pay the interest on it, or to pay a dividend declared, and the failure has continued for one year or more.

The person is not eligible to be reappointed in that company, or appointed in any other company, for five years from the date the company failed. The filing test is three continuous financial years. The repayment test is a failure that continues for one year. They are not the same clock.

Which offices does the person vacate?

Section 167 says the office becomes vacant when the person incurs a disqualification under section 164. Where the disqualification is under section 164(2), the office becomes vacant in all the companies other than the company which is in default. The person remains a director of the defaulting company, but cannot be reappointed there during the five years. Who may be appointed in the vacant seat is on the director page.

When does the bar end?

A personal ground ends when that ground itself ends: the sentence period has run, the insolvency is discharged, or the calls are no longer in the six-month default. The section 164(2) bar lasts five years from the failure. Filing the overdue statements stops a fresh default. It does not wipe the five years that have already started. A closed filing scheme of an earlier year is not an open route to cancel the bar. A deactivated DIN, caused by a missed DIR-3 KYC, is cured by filing that form. It is a different defect from section 164(2).

A private company may, in its articles, add further grounds on which a person is not eligible to be its director. Those extra grounds do not rewrite section 164 for every other company.

Frequently asked questions

Four questions cover the defaulting company, a late KYC, overdue filings, and the articles.