♦ 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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Disclaimer: The entire content 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, Author assumes no responsibility thereof. The user of the information agrees that the information is not a professional advice and is subject to change without notice. In no event, we shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of information.

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