Page 155 - DCOM106_COMPANY_LAW

Company Law

Notes 7. Such person is already a director of a public company which, (a) has not filed the annual
accounts and annual returns for any continuous three financial years; or
8. Has failed to repay its deposit or interest thereon on due date or redeem its debentures on
due date or pay dividend, and such failure continues for one year or more. Further, such
person shall not be eligible to be appointed as a director of any other public company for
a period of 5 years from the date on which such public company, in which he is a director,
failed to file annual accounts and annual returns under (a) above or has failed to repay its
deposits or interest or redeem its debentures on due date or pay dividend referred to
in (b).

The disqualifications mentioned under (iv) and (v) above may be removed by the Central
Government by a notification in the official gazette. On the other hand, a private company may
provide in its articles that a person shall be disqualified for appointment as director on any
other additional ground. However, a subsidiary private company or a public company cannot,
by its articles, provide for any additional disqualifications.

10.3.1 Other Disqualifications

The following two provisions also provide for disqualifications of directors:
(i) Where a director has been convicted of an offence under s. 209A, he shall, on and from the
date on which he is so convicted, be deemed to have vacated his office as such. On such a
vacation of office, he shall be disqualified for holding the office of a director in any
company for a period of five years from such date.
(ii) A director who has been removed from any managerial position by the Central
Government shall not be a director of a company, for a period of five years from the date
of the order of removal unless the said Government has reduced the period with the
concurrence of the Company Law Board [s, 388 E].

10.3.2 Minor as a Director

In the case of a minor, though there is no provision in the Act, expressly disqualifying him, as he
is not competent to contract, he cannot file either with the company or with the registrar any
valid consent to act as director, as required by s.264. But as s.264 applies only to public companies;
there is nothing prohibiting a minor being a director of a private company. However, from a
practical point of view a minor can be an ornamental director as he can neither be party to any
transaction which requires competency to contract – nor, for the same reason, can he be delegated
any powers of the board. He may possibly vote on all resolutions at board meetings.

Example: Mr. Ram is a director of ABC Ltd. XYZ Ltd. and PQR Ltd. ABC Ltd. was regular
in filing annual returns, but did not file annual accounts for the year ended March 31, 2007.
Further ABC Ltd. failed to pay interest on loans taken from a public financial institution from
st
1 January, 2007 onwards and also failed to repay the matured deposits on due date from
st
1 April, 2007 onwards.
st
Mr. Ram is proposed to be appointed as additional director of MN Ltd. on 1 June, 2008.
Also Mr. Ram wants to continue as a director of XYZ Ltd. and PQR Ltd. Further, he seeks
reappointment when he retires by rotation at the AGM, of respective companies to be held in
September, 2008.

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