A director is a person who plays an important role in a company by handling the organization’s affairs. Many people may have queries or may not be aware of the director’s disqualification. When a company director gets ceased to function from these works like promoting, forming, or running a company, this may lead to the directors disqualification and occurs when the announced person is found unethical of legal responsibilities.
Liquidation, Receivership, or Administrations are common among the companies and they go through these aspects. In case of any misconduct or any other issues, reports can be made by checking officers to the Insolvency Service. After filing a lawsuit against the transgression it should be registered to get an insolvency order. Director disqualification order can be maximum of 15 years and a minimum of 2 years. The period of disqualification depends on the inappropriate conduct, the court decides the kind of judgment to be given for the disqualification. Even a director can ask for his disqualification if he/she feels that there would be a court case under his/her name, in this case, he/she can ameliorate his/her disqualification period or he/she may have a minimal amount of penalties. It is the best way to make a defense through advocate support before there is filing for disqualification. And the director should give the reasons why he/she acted the way they did. By chance, if the lawsuit is submitted, then one can counterattack it by issuing a written statement of truth before the trial and this may help the director to reduce the consequences.
Director Disqualification –
Director disqualification is not something anyone wants. One can guarantee that if it does not go on better to defend yourself when you get listed for disqualification. In conformity with section 164(2)(a) of the Companies Act 2013, any person who is or has been a director of a company that has not filed financial statements or annual returns for any continuous period of three financial years, then he/she shall be ineligible for reappointment as a director of that company or ordained in another company for five years from the duration on which the told corporation ceases to function to so. There exist additional explanations as well through which a person can be disqualified to be a Director, particularly the directors are disqualified under this requirement only and in additional layman language. A person shall be disqualified to be a Director for five years if the company in which he/she is or was a director who had not documented financial statements before.
Are you scared that you may get disqualified as a director? If you are facing disqualification, there are many things a director can do. Find an advocate who could help you in dealing with disqualification and minimizing the penalties. As The Company act, 2013 does not provide any corrective measure for the removal of disqualification of director, accordingly, the foremost and convenient option is to change positions to the Honorable high court for deportation of director disqualification with jurisdictional viability that is under ROC. The director is disqualified, but accordingly again under this alternative, the various decent high courts have several precedents and impressions in this concern. Further, the invitation with the respected high courts is existing filed under article 226 of the Indian legislation under Writ jurisdiction to pursue consolation. The Companies Act 2013 under section 164 provides with the requirements for the disqualification for the petition of the director. In agreement with the Companies Act 2013, Section 164 is favorable in the direction of disqualification for a nomination of director.
No individual who is or remembers been a Director or a company that has not filed financial statements or annual recoveries for any continual period of three years shall be capable towards existing reappointed as a director of that company or appointed in other corporations for 5 years from the date on which the announced company fails to do so under Section 164(2). This category bargains with the disqualification of directors. It asserts that when the company remembers not filed monetary statements or annual returns, for any three straight years, it will subside on the disqualification of its governors for five years. By the way, section 164(2)(a) of the companies act, 2013, any person who has been a director of a company that has not filed financial statements or annual returns for any consecutive period, the administrator shall be ineligible for reappointment as a director of that company or appointed in another company for five years from the said company fails to do so.
If a director is disqualified or in the process of disqualification then backend appointment of the director will be most suitable to confirm continuity of the company and that the annual returns and financial statement are files with the ROC timely and can be opted majorly in the following situations –Where all the directors are disqualified in an ACTIVE company and are not able to remove the same from the honorable high court. Where a running company's operations get affected by the fact of having common Directors of a non-compliant company.
Sovereignty to seek authorization from the court to act as director –
It allows for disqualified directors to apply in court if they have a reasonable need to act as a company director again by The Company Director Disqualification Act. And results will be taken based on if the court agrees with a request such as this, however, they may put restrictions in place on the duties that can be performed.
Solutions to undergo disqualification of a director –
Dispute with NCLT under section 252 for rehabilitation for struck off companies:
Under section 252 of the companies act, 2013 petition should be filed with an appeal.
Petition to companies whose name got struck off in disqualification.
Dispute to be made before the National Company Law Tribunal(NCLT) to recover the name of the company with the Registrar of companies(ROC).
Dispute with the High Court by filing a Writ Petition for Disqualified Directors:
Indian Constitution furnishes that extremely disqualified directors can file a writ petition in the apprehensive High Courts to investigate relaxation under Article 226.
This solution has been explored since 2017 by many of the disqualified directors in High courts and the determinations have given a new lease of life to a Director's career.
What is this unfit conduct mean?
Beginning again to trade when you realize that the company is insolvent.
Failing to keep proper accounting records.
Failure to pay company tax liabilities.
Statutory accounts and returns at Companies House are not filed.
Using the company funds or assets for your benefits.
Fraudulent activity.
Failing to assist the appointed insolvency practitioner.
Once your company is deemed insolvent, the appointed Insolvency Practitioner is required to file a report as part of their official duties and it will be sent to the Secretary of State for Business, creation, and abilities. Disqualification will begin once the public interest take further action, and if there is enough evidence to do so, proceedings to effect disqualification will begin. There is a statutory duration threshold of two years from the duration of insolvency in which proceedings can put up with its place, but in particular circumstances, this can be broadened.
What can a disqualified director do?
A director who is existed and disqualified by the court may function for a company as its employee, nonetheless, they would desire to be able to simply show that they were not pertained to in anything which could be designed as the role of a director. It is also permitted to carry on business as a sole trade while disqualified or be in a partnership although not a limited liability partnership. If the court agrees, it may attach restrictions.
Things to know about?
Disqualified directors remember to file a writ petition under Article 226 of the establishment of India before the high court. The writ petition should benefit Urgent Application, Notice of movement, Memo of festivities, Synopsis, and list of duration and circumstances, Circumstances which govern to non-compliance of filing of statutory documents, the importance of corporation and directors pursuing development, copy of the press release notice issued by ROC listing disqualified directors, List of all corporations in which the appellant is director, keep up petition under section 151 of CPC, devotion sentence for committing the edition handed out by ROC. The company can remote file an interest under section 252 of businesses act, 2013 before the NCLT for renovating the company name. As spoken of above, after the culmination of submission, the ROC will put forward a ticket on MCA21 and upload a document of the order. Lastly, after reasonable verification, the bureaucrats will reactivate the DIN.
Conclusion: Section 164 is filled up with disqualifications. Extent a preponderance of them are subjective and there is rationale for outcomes, Section 164(2)(a) is in the context of a submission infringement in the protocol by the defaulting company. Section 164(2)(b) is a significant regulation as it markets with a company bankruptcy in alternate of deposits or expenditure of attention or salvation of debentures on the outstanding duration.