Appointment of Directors from backend due to disqualification of all directors

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A company has no physical existence, it is merely a legal entity. It can only act through natural persons. The person acting on the company’s behalf is called a Director. They are professional people, hired by the company to direct its affairs. They can also be called – the officers of a company. Any person can hold the position of a Director. Company law in India does not prescribe any qualifications for Directors. Therefore, the Indian companies may, in its Articles, lay down qualifications for Directors.

Disqualifications of Directors under Companies Act, 2013

Under company law, a director can be disqualified for any of the following reason:

  • He is of an unsound mind and is declared so by the court.
  • He is insolvent.
  • He is in the process of declaring insolvency and his application is pending.
  • He has been convicted by a court of any offence (whether or not involving moral turpitude) and has been imprisoned for at least six months. However, if a person has been convicted of any offence and has served a period of seven years or more, he shall not be eligible to be appointed as a director in any company.
  • If an order has been passed disqualifying him of being appointed as a director by a court or Tribunal.
  • He has not paid any calls with respect to any shares of the company held by him, whether alone or jointly with others, and a period of six months has elapsed from the last day fixed for the payment of the call.
  • He has been convicted of offences dealing with related party transactions at any time during the last preceding five years.
  • He has failed to acquire a Director Identification Number.

Effects of Disqualification

Once disqualified, a person is not eligible for being appointed as Director of that company or any other company. This restriction is imposed for a period of five years or as the case may be. Since the year 2017, the Ministry of Corporate Affairs (MCA) has been strictly enforcing these provisions of the Companies Act. It has recently published the names of the disqualified Directors on the government website.

Appointment of Director From Backend

Where all the directors’ of the company are disqualified, Company has to induct new directors from back end of Registrar of Companies office submitting physical documents. To appoint a new Director, the Company needs to submit, a request letter under Section 167(3) of the Companies Act, 2013 signed by Shareholders of the Company explaining the facts that all the Directors of the Company are disqualified and requesting for insertion of at least 1 Director through back end of the e-portal.

The Request Letter shall be signed by Shareholders of the Company explaining the facts that all the Directors of the Company are disqualified and requesting for insertion of at least 1 Director through back end.

Documents Required for Appointment of Directors from backend of ROC

Following documents and information are required:

  • DIN No. of new Director
  • Shareholding Proof (Copy of share Certificate)
  • Register of Member
  • PAN Copy of New Directors
  • Identity Proof of New Director( Aadhar Card or Passport Copy)
  • Address Proof of New Director ( Electricity Bill or Mobile Bill or Bank Statements)
  • Digital Signature of New Director
  • Email ID and Contact No. of New Director.

Procedure For Appointment of Director from Backend.

  • Request letter signed by the Promoters/shareholders of the company explaining the facts and requesting for insertion of at least one director through the backend of the MCA portal with the following attachments
  • Appointment of the new directors under section 167(3) of the Companies Act, 2013 by the promoters/shareholders;
    Physical E-Form DIR-12 manually signed for the appointment of new Director along with requisite fees and additional fees as applicable paid through a miscellaneous challan (Under Individual category) along with following documents:
    • DIR-2 Consent Letter of Director.
    • Address and ID Proof of appointee Director;
    • MBP-1 Notice of interest by the Director
    • Print out of DIN status of the New Director
    • Print out of Names and CIN of the Company where new Director is already a director.
    • DIR-8
  • A Certificate from professional, stating that he/she has verified the register of members and other connected records and certifies that the applicant/s is/are the majority shareholder/s.
  • Copy of resolution for appointment of the new Directors along with the copy of notice and explanatory statement.
  • Proof of shareholding of the Promoters/shareholders (who appoints the new director) like share certificates or register of members updated till the date of the request letter along with certification by professional with membership number etc
  • The above documents to be submitted in hard copy along with soft copy in pen drive only.
  • After filing of all these documents to the concerned Registrar of Companies (ROC) the ROC will forward the application to the concerned Regional Director for the insertion of the name of one Director on the portal 

Takeaway

In case of disqualification, a director can appeal to the National Company Law Appellate Tribunal (NCLAT). He/she can temporarily ask for a stay order. Under the Companies Act 2013, an order disqualifying a Director does not take effect within the next 30 days of it being passed. As soon as an appeal is initiated, the disqualified person will still continue to be a director for the next seven days. Within this period, he can file his annual returns to stay the order of disqualification. However, there exists no procedure to reappoint a disqualified director. He can only be reappointed after a period of five years has elapsed from the date of disqualification.

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