Qualification & Disqualification Of Directors

Qualification & Disqualification Of Directors

 The Act provides for a dedicated provision, which is Section 162 that underlines the explanations that an individual might not appoint as a director. there’s no such provision regarding the qualification under the Act. However, requirements are listed as below:

1. The said person should have completed 18 years age or above.
   2. Nationality are often that of Indian or otherwise.
   3. The person must be in receipt of his own Digital Signature Certificate (DSC) and the same be used for obtaining Director’s identification number (DIN).
   4. The person shall also furnish a written declaration providing his consent to act as the Director and he’s not someone who falls under the category of disqualified members.
   5. there’s no academic qualification that has to be held by the one who is desirous of obtaining the directorship of a corporation.

DISQUALIFICATION OF DIRECTORS

Section 164(1) provides grounds on which someone becomes disqualified to act as a director. someone shall not be eligible to become a director of a corporation if he

• is an undischarged insolvent or has applied for it and his application continues to be pending
• has been convicted for any offence and sentenced to imprisonment for a minimum period of six months and five years haven’t passed from the last date of his sentence (A one who has been convicted and sentenced for seven years or more becomes ineligible for all time).
• Any order disqualifying the director, for appointment as a director, and the same be passed by a court or Tribunal
• has not paid any calls in respect of any shares of the corporate held by him and 6 months have elapsed from the date of payment
• has been convicted in respect of an offence addressing related party transactions as per section 188 during the preceding five years
• has not been allotted a Director identification number (discussed later within the text)
• accepts directorships exceeding the most number of directorships provided in section 165, which brings us to our next topic, which is about the bounds imposed on the quantity of directorships that someone can hold at only once.

LIMITS ON NUMBER OF DIRECTORSHIPS

A person is allowed to hold directorship in maximum of 20 companies at one point of time (including alternate directorship but excluding dormant companies). This limit doesn’t apply to Section 8 companies. However, in case of public companies (including their private holding or subsidiary companies) the said limit has been reduced to only ten.

DIRECTOR IDENTIFICATION NUMBER (DIN)

A person is disqualified from acting as a company’s director if he has not obtained a legitimate DIN. DIN could be a unique identification number that may be obtained by somebody who intends to be a director or is already acting as a director during a company but has not obtained a DIN. One director is allowed to hold only one DIN at a time. Just in case if a director has wrongly obtained two DINs, then he’s required to surrender his latest DIN.

Forms required for obtaining or surrendering DIN are mentioned later during this article.
DIN may also be obtained through the SPICE form at the time of incorporating the corporate (Up-to 3 DINs is applied for).

DOCUMENTS FOR OBTAINING DIN

1. Proof of Identity of the applicant (duly attested attachment)

• • Indian national-PAN is mandatory
  • Foreign national-Passport

5. Proof of residence of the applicant (duly attested attachment)
6. Photograph (format-JPG, max size-100kb)
7. DSC of the applicant
8. Attestation by any existing director of the corporate within which the person proposes to be a director. Fees to be submitted-Rs 500

APPOINTMENT OF DIRECTORS

The appointment of a director is often made by

• Subscribing to the memorandum (First Director)
  •Passing a resolution during a General Meeting (Director/ Regularization/ \ Reappointment)
  • Board of Directors (Alternate/ Casual/ Additional Director)
  • Small Shareholders (Small shareholders director)
  • Tribunal

DUTIES OF A DIRECTOR

Section 166 talks about the duties which a director has got to perform in a company. Their duty is

• To act in good faith
  • To act as per the articles of the corporate
  • To exercise care and diligence
  • To avoid any sought of conflict of interest and hence do not make any undue gain
  • Not to assign his office to the other person

RESIGNATION OF DIRECTOR

A director is required to administer notice to the corporate intimating his resignation. The date of resignation shall be the date of receiving the data by the corporate or any date which is mentioned by the director within the notice (whichever is later).

After taking note of this, the corporate shall inform the registrar about this within 30 days of his resignation. If the corporate fails or refuses to file the director’s resignation, then the director can even intimate about his resignation within the prescribed form. (In Karn Gupta v. Union of India case, it had been held that if a director has resigned before the particular default, but the corporate fails to tell the ROC about his resignation, then the director’s resignation shall not be rendered invalid and he won’t be accountable for the default.

A director are going to be held accountable for all the actions done by him during his directorship within the office. (In the case of Alibaba Nabibasha, it had been held that a director isn’t answerable for any act done by the corporate after his resignation).

REMOVAL OF A DIRECTOR

A company or its shareholders may remove its director by passing a standard resolution (but not the director appointed by the tribunal). An independent director (appointed on his second term within the company) can only be removed after passing a special resolution by the shareholders.

The tribunal may also remove a director if it’s received any application of oppression and mismanagement within the company and if it deems acceptable remove the director.

VACATION OF OFFICE OF DIRECTOR

The director shall vacant the office where,

• Becomes disqualified to act as a director (if the director has did not file financial statements and annual returns of an organization for 3 years continuously, then he shall vacate his office altogether the businesses but not the corporate during which he has defaulted.
• Fails to attend any board meeting for a continuous period of twelve months.
• Contravenes the provisions associated with contracts within which the director was interested.
• Any court’s order, restricting the director from appointing in any company.
• Is removed in line with the provisions of the Act
• Was appointed due to his holding office in another company and has ceased to carry office in this company.
• Ceases to be a tiny low shareholder or fails to fulfill the factors of independence (in case of small shareholders director)
  Private companies are allowed to produce some additional grounds also in their articles.

ANNUAL ROTATION OF DIRECTOR 

AOA may provide for the retirement of each director by rotation in a company. But if there’s no clause associated with it mentioned within the AOA, then, therein case, a minimum of two-thirds of the whole number of directors shall be prone to retire by rotation and be appointed within the AGM of the corporate (in case of a Listed company). Out of these directors who are at risk of retire, one-third of the administrators shall retire once a year at the Annual General Meeting. Where the directors are less than three, then, one-third of the directors shall retire from office.

The directors susceptible to retire by rotation at every AGM shall be those that have the longest tenure in office since their last date of appointment, but as between persons who became directors on the identical day, be determined by lot as agreed between them.

Small shareholders directors, independent directors and nominee directors are not susceptible to retire by rotation.

DISCLOSURE OF INTEREST BY DIRECTOR 

All the administrators are required to disclose their interests in any company if any. This disclosure shall be made at his first meeting and also the first meetings within the subsequent financial years. If there’s any change in his interests, then also he’s required to disclose it.

**********************************************************

If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.

Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.