If you are planning to start a company or looking to appoint additional director or reappoint a director, Then first thing you should check whether proposed director is qualified for appointment or not?
Qualification of Director under companies act 2013 is covered by Section 164 read with relevant rules.
There are two scenarios to check for qualification of directors
- When director is going to be appointed for first time
- To check whether existing director is disqualified or not? or reappointment of director
When director is going to be appointed for first time?
Below are the provisions under companies act
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 undischarged 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 six months and a period of five 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 seven 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 six 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 five years
(h) does not have the DIN number
To check whether existing director is disqualified or not? or reappointment of director
No person shall 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 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
(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
Point to be noted: A company can further add more disqualification rules in its articles. However, it cannot amend or delete the statutory provisions laid down in companies act 2013