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DIR 10


What is DIR 10?

A company is generally managed by a bunch of people known as directors who collectively form the Board of Directors. They are responsible for making strategic decisions that affect the overall functioning of the business entity. It is imperative that the directors act in good faith and work towards the benefit of the shareholders and the company that they represent. A director is expected to perform his tasks and duties with diligence and utmost care and integrity, failing which he/she could be removed or ousted. The year 2017 saw a massive step taken in the right direction by the government as they disqualified over 3,00,000 persons holding directorship positions as they failed to comply with regulatory requirements that were set by the Companies Act, 2013.

Who & When has to Disqualify?

The Companies Act, 2013 lays down the grounds upon which a director may attract disqualification. Section 164 of the Companies Act, 2013 deals with the same, presented here in a condensed manner:-

  • Where he/she has been declared as a person of unsound mind by a competent court.
  • Where he/she is an undischarged insolvent.
  • Where insolvency has been applied for, but the application still stands pending.
  • Where there is an offence involving moral turpitude that he/she has been convicted of and sentenced with imprisonment for a period of not less than six months.
  • Any court/Tribunal has passed an order that disqualifies him from being appointed as a director.
  • Where he/she holds the shares of any company and has not made the payment of any such call, provided six months have passed since the last date to pay such call money.
  • At any time during the final preceding five years, he/she has been convicted of an offence involving related party transactions which are governed under Section 188 of the Companies Act, 2013.
  • Where he/she has not obtained a Director Identification Number (“DIN”).
  • Where he/she is the director of a company that has either – a. Failed to file the annual returns for 3 years running b. Failed to pay interest on/repay the deposits for over a year c. Failed to pay any dividend that was declared for over a year d. Failed to redeem debentures or pay interest on debentures for over a year

With regard to this particular provision, non-eligibility for directorship will be for a period of five years from the date of such default, be it in that particular company or any other company.

Effects of Disqualification

  • Not eligible for being appointed as Director for any company.
  • This restriction is imposed for a period of five years or as the case may be.
  • Since 2017, the Ministry of Corporate Affairs (MCA) has been strictly enforcing these provisions of the Companies Act and has published the names of the disqualified Directors MCA portal

The following detail needs to provide

Registration No. of Company, Nominal Capital, Paid-up Capital, Name of Company, Address of its Registered Office, Grounds under which director(s) are disqualified & Date of disqualification

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