[Analysis] Whether the personal hearing is a pre-requisite for disqualifying the directors?

[2022] 137 taxmann.com 275 (Article)

Provisions under Companies Act on Director’s Disqualification

As per sub-section (2) (a) of section 164 of the Companies Act 2013, we could see the following provisions:-

“no person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.”

The Disqualification Process

Any person who has failed to file financial statements i.e. filing of annual financial statements in form AOC-4 and annual return in form MGT-7 for a continuous period of three financial years shall not be eligible for being appointed as a director of that particular company or in any other company for a period of next five years.

Once the disqualification occurs, the Registrar of Companies would make the DIN status of the concerned director as inactive by marking the remarks as “Disqualified by ROC u/s 164(2) (a). Further, the list of disqualified directors during a particular year is also being published on the portal of Ministry of Corporate Affairs stating that these directors are disqualified for being appointed as directors due to non-filing of financial statements or annual returns mention the period for which these documents have not been filed.

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