30 November 2021
The sub-section 2 of section 164 of the Companies Act, 2013 (“Act”) provides that any 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 three 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 one year or more,
shall not be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
Section 164(2) of the Act provides that the director shall be considered as disqualified and his Director Identification Number (“DIN”) shall be deactivated for a period of five years beginning from the date of the disqualification.
The Registrar of Companies (“ROC”) vide their powers provided under the Act identified the companies which did not file its financial statements or annual returns for a continuous period of three financial years and issued notice to such companies and disqualified the directors who were on the Board of such companies. Further, the ROC vide it’s power provided under Section 248 of the Act, issued notice to such companies to provide a reasonable cause of not striking them off. The companies who failed to provide their response within the period provided in the notice were struck off from the records of the ROC and were dissolved. The collective initiative led by the ROC and MCA was a first and most significant step taken by the Government of India to eliminate the shell companies.
The DINs of the disqualified directors were marked as “Disqualified” under sub-section 2(a) of section 164 for a period of 5 years beginning from November 1, 2016 to October 31, 2021. On expiry of the five year period, MCA promptly released an update on November 10, 2021 providing that a director’s DIN eligible to be de-flagged on expiry of the period of disqualification is in the process of verification and the necessary action will be taken by the MCA. In other words, no action was required from the disqualified directors to get their DINs activated.
Recently, an update was provided by the MCA on November 23, 2021 that the “Disqualified” status from DIN of directors has been automatically removed and such directors are now eligible to be inducted to the Board of other companies. The status of the DINs of such directors has automatically changed on the web portal of the MCA from “Disqualified under Section 164(2)” to “Approved”. The present status of the DIN of disqualified directors can be checked by assessing the below link.
https://www.mca.gov.in/mcafoportal/showEnquireDIN.do
The automatic removal of disqualification by the MCA is yet another remarkable step added to the ease of doing business initiatives led by the Government of India. This not only provided a hassle free solution but also helped in re-gaining the trust of directors who suffered disqualification for a five year long period.
For further information, please contact:
Neetika Ahuja, Partner, Clasis Law
neetika.ahuja@clasislaw.com
Jatin Oberoi, Clasis Law
jatin.oberoi@clasislaw.com
