Short Summary:

In  this article author explains Impact of Expiry of Condonation of Delay Scheme, 2018 in relation to Active Companies or Struck off Companies Both.

Condonation of delay scheme 2018 [CODS-2018]  was effective w.e.f. 01st January, 2018 to 01st May, 2018. Many Companies have taken the benefit of Condonation of delay scheme 2018 by completion of pending Annual Forms with ROC along with CODS form. However, still lot of Companies are there in MCA records, which have still not completed the pending Annual Filings.

Quick Questions:

1. Whether CODS shall be available to Companies, which has filed petition for restoration of Companies before NCLT on or before 01st May, 2018?

As per paragraph no. 4 point (v) of CODS: 

In case of struck off Companies u/s 248 and which have filed application for revival “upto the date of scheme (i.e. 01st  May, 2018) in such situation DIN of Directors shall be re-activated on NCLT order.

After reading above paragraph, one can opine that if a company has filed application u/s 252 for revival of Company before 01st May, 2018 in such case his DIN shall be reactivate after order of NCLT (even if passed after 01st May, 2018)

Note: However, MCA through its circular dated 17.05.2018 also has given clarity on this that Companies which has filed petition u/s 252 before 01.05.2018 shall be eligible for the benefit of CODS.

2. Whether CODS shall be available to Companies, which has filed writ petition for Strike off of Companies before High Court on or before 01st May, 2018?

CODS shall not be available to the companies, who have filed write petition with high court even before or after 01st May, 2018, If order received after 01st May, 2018.

Even in its orders Hon’ble high court has given the instruction to companies to file overdue documents with additional fees to ROC.

3. Whether a person having directorship in more than 1 strike off Company, has filed application before NCLT before 01.05.2018 for restoration of any of such Company (application not filed for revival of all the struck off companies).

Whether DIN of such director shall be activate on order of NCLT?

As per Circular of MCA dated 17.05.2018; The director whose DIN are proposed to be activated through NCLT order, that person should not be directors on any other Company which has been struck off under Section 248(1) and status of such companies are still struck off.

Therefore, one can opine that if a person is holding directorship in more than 1 Company and not received order for revival of all such struck off Companies his DIN shall not be reactivate. (In any case due to CODS his DIN activated by MCA having power to again deactivated after expiry of scheme)

4. If a Company having active status and completed all the pending annual filing after 01.05.2018 but not filed CODS,2018. Whether DIN of such director can be activated or his disqualification can be remove?

As such company has not taken the benefits of CODS, 2018 (by filing all pending documents on or before 01.05.2018 with CODS form) therefore even after completion of filing his disqualification shall be continue and his DIN shall not be activate. (In any case due to CODS his DIN activated by MCA having power to again deactivated after expiry of scheme)

5. How to remove the disqualification of directors if they have not taken benefit of CODS?

As per provision of section 164(2) if a person become disqualified, his disqualification shall be continue for 5 from the date on which the said company fails to do compliances.

As of now there is no way out under companies Act, 2013 for removal of Disqualification of Director. Ministry in future may come out with any scheme or clarification on the same.

“Once disqualification, Disqualification for 5 years”

6. Whether such directors who have not taken benefit of CODS continuing as disqualified, whether they have to vacant the office from other non defaulting Companies?

As per provision of section 167, if a person is disqualified u/s 164(2) he have to vacant his office from all the other Companies in which he is holding position as Director.

If such person doesn’t vacant his office from other companies then following is the penalty for the same:

If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in sub- section (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both

7. Whether disqualified director can be subscriber in any Company?

As per provisions of the Act, a person shall be eligible to become subscriber of any company or shareholder of any Company.

8. Whether disqualified director can be appointed as designated partner in LLP?

Disqualification of such person shall be limited on Companies Act not on the other Acts. Therefore, he is eligible to get appointment as designated partner.

9. What is available way out for active disqualified companies to continue their business?

Appoint new Director in such Company for completion of the pending compliance

As due to disqualifications of the entire directors, there is NIL Directors on the Board and the Company. The promoters of the Company can appoint any other person as Director of the Company that person shall hold the office till the next General Meeting of the Company. Hence one question is clear that Promoter can appoint the Director.

However, how to file the form / update in the record of the ROC name of the person appointed by promoters. At the same time as all the directors are disqualified so company can’t use their DSC.

In such Situation company can file the physical copy of application along with details of the person appointed by promoter to act as director of the Company. The ROC officials shall verify the application and if they are satisfied they will update the name of such person in their record as Director of the Company.

Hence, This remedy is in addition to any other remedies available to the members of such a company by applying to the Tribunal for an order convening a general meeting of the company under section 98 of the Act.

10. A person who is disqualified u/s 164(2) but by chance having Active DIN. Whether such person should file any e-form of active companies with his DIN or DSC?

As per combined reading of Section 164(2) and 167(1) once disqualification of a person triggered then he shall vacant his office from all the companies in which he is holding position as Director.

Therefore, a person who is disqualified, who vacant his office automatically due to provisions of Act, shall not considered as Director of a Company. If a person is not holding position as director then one can opine that he is not eligible to sign any documents as director or file any form with any authority as Director.

However, by ignoring the above mentioned provisions a person act as director for such Companies then he shall be liable for the following below mentioned penalty as imprisonment or fine.

Penalty:

If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in sub- section (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

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Category : Company Law (3808)
Type : Articles (16722)
Tags : Companies Act (2275) Companies Act 2013 (2048) FAQs (425)

2 responses to “FAQs on Disqualification of Director from 01.05.2018 Onwards after expiry of CODS-2018”

  1. Ashutosh Khare says:

    Since as per provision of section 164(2) if a person become disqualified, his disqualification shall be continue for 5 years from the date on which the said company fails to do compliance. As of now there is no way out under companies Act, 2013 for removal of Disqualification of Director. Ministry in future may come out with any scheme or clarification on the same. Thus once the director is disqualified by the Act, the disqualification can not be removed even by filing all the documents under CODS Scheme of defaulting companies.

  2. BHASKARAN CHAKRAPANI WARRIER says:

    Good writing except certain grammatical error. Thanks.

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