Disqualification

Disqualification is the legal state in which a person is barred from being appointed or continuing as a director of a company. In India it is governed chiefly by Section 164 of the Companies Act, 2013, which lists the grounds, and Section 167, under which a disqualified director's office falls vacant. The Ministry of Corporate Affairs (MCA) and the Registrar of Companies (ROC) enforce it, and a disqualification is reflected against the individual's Director Identification Number (DIN).

Common grounds under Section 164(1)

• Being of unsound mind (as declared by a competent court) or an undischarged insolvent.
• Conviction by a court of any offence, whether involving moral turpitude or otherwise, with imprisonment of at least six months, where five years have not yet elapsed since the sentence; a sentence of seven years or more disqualifies permanently.
• Being disqualified by an order of a court or tribunal, or failing to pay calls on shares held.
• Not complying with the DIN requirement under Section 152(3), or a conviction under Section 188 for a related-party transaction offence in the preceding five years.

Company-default disqualification (Section 164(2))

A director is also disqualified for five years if a company on whose board they served either failed to file financial statements or annual returns for three continuous financial years, or failed to repay deposits, redeem debentures, or pay declared dividends for a year or more. Mass disqualifications under this clause followed the striking-off of shell companies.

Related deactivation

A DIN may be deactivated separately for not filing Form DIR-3 KYC under Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014. This is a compliance flag reactivated on filing with fee, not a Section 164 disqualification, though both prevent a person from acting as director.