♦ Sec – 164(1): A person shall not be eligible for appointment as a director of a company, if:
a. he is of unsound mind and stands so declared by a competent court;
b. he is an un-discharged insolvent;
c. he has applied to be adjudicated as an insolvent and his application is pending;
d. he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than 6 months and a period of 5 years has not elapsed from the date of expiry of the sentence:
> Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of 7 years or more, he shall not be eligible to be appointed as a director in any company;
e. an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
f. he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and 6 months have elapsed from the last day fixed for the payment of the call;
g. he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding 5 years; or
h. he has not complied with section 152(3).
i. he has not complied with the provisions of section 165(1).
♦ Sec – 164(2): No person who is or has been a director of a company which:
(a) has not filed:
√ financial statements or
√ annual returns for any continuous period of 3 financial years; or
(b) has failed to:
√ repay the deposits accepted by it or
√ pay interest thereon or
√ to redeem any debentures on the due date or
√ pay interest due thereon or
√ pay any dividend declared and
such failure to pay or redeem continues for 1 year or more, shall be eligible to be:
- re-appointed as a director of that company or
- appointed in other company for a period of 5 years from the date on which the said company fails to do
> Provided that 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 6 months from the date of his appointment.
♦ Sec – 164(3): A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in section 164(1) and (2):
> Provided that the disqualifications referred to in clauses (d), (e) and (g) of section 164(1) shall:
- continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification.
♦ Note-1: In case of Government Company – Section 164(2) shall not apply [Notification dated 5th June, 2015]
♦ Practical Question:
Que-1: Is it compulsory to take Form DIR-8 for every financial year as it is not mentioned in the law?
Answer: Rule 14(1) of Companies (Appointment of Directors and Qualification) Rules, 2014 provides that Form DIR-8 is required to be filed by a director at the time before his appointment or re-appointment. The statutory auditors of the company may also ask for such a declaration on an yearly basis as there is a duty cast on the auditors u/s. 143(3)(g) of the Companies Act, 2013 to state in his/her audit report whether any of the directors have suffered any disqualification u/s. 164(2) of the Act.
As a good practice, Form DIR-8 may be submitted before the commencement of every financial year by the directors of a company.
However, it is not mandatory to do so.
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