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In September MCA had canceled registrations of defaulting companies (over 2 Lakh) and also debarred over 3 Lakh directors of companies. Such an action was taken under the provisions for deregistering companies that had failed to file returns under amended companies act 2014. Besides, Section 164 of the companies act deals with disqualification of Directors under which one of the circumstances being a failure of filing of financial statements or annual returns by the Director of a company for three continuous financial years. In such a scenario the director shall not be qualified for reappointment in that company or appointment in any other company for five years.
Disqualification of Directors:
Earlier, Section 274 of the Companies Act 1956 dealt with the disqualification of directors of a public limited company but the act was amended fetching private entities in 2014 through Companies Act of 2013.
After such an order many directors started to approach the courts filling against their entitlement done by the government. The Delhi and Madras High Courts after receiving petitions that challenged the disqualifications of more than 3 Lakh directors have noticed the corporate affairs ministry and the registrar of companies (RoC).
National Stock Exchange ordered contemplation:
Taking the said development in view, The National Stock Exchange has asked 200 listed companies to contemplate whether those directors who have been disqualified by the ministry should continue on their boards.
Further, according to section 164 (2) of the Companies Act, 2013 once the director is disqualified, he is advised not to act as a director for that period and also not to file or sign using digital signature any document or application with MCA. The corporate affairs ministry stated that in case such an act is done, that document or application will stand rejected. A senior government official stated that director got disqualified “under the operation of law”, and notices were sent to the companies before striking of their names.
The government after the meeting on Monday 30th October 2017 can come up with some solution for the aggrieved directors since no recourse is currently available under the Companies Act 2013.