Page 293 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes Section 274 has laid down certain disqualifications and therefore, the following persons
are incapable of being appointed directors of any company: (i) a person found by the court
to be of unsound mind; (ii) an undischarged insolvent; (iii) a person who has applied to be
adjudged an insolvent; (iv) a person who has been convicted anywhere in the world for an
offence involving moral turpitude and sentenced in respect thereof to imprisonment for
not less than six months and a period of five years has not elapsed from the date of the
expiry of the sentence; (v) a person who has failed to pay calls on shares for six months
from the date fixed for the payment; (vi) a person who has been disqualified by court
under s.203 which empowers the court to restrain fraudulent persons from managing
companies; (vii) 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
(b) has failed to repay its depositor interest there 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
deposit 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.

Notes 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
companies. However, from a practical point of view a minor can be an ornamental director
as he cannot 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.
7. Vacation of Office of a Director. Section 283 provides for the office of the director becoming
vacant on the happening of certain contingencies. It provides that the office of a director
shall become vacant if: (i) he is found to be of unsound mind by a competent court; (ii) he
is adjudged insolvent; (iii) he fails to obtain within two months of his appointment, or
ceases to hold at any time thereafter his share qualification, if any; (iv) he is convicted of
any offence involving moral turpitude and sentenced to imprisonment for not less than
six months; (v) he fails to pay any call within six months from the last date fixed for the
payment; (vi) he absents himself from three consecutive meetings of the Board of Directors,
or from all meetings of the board for a continuous period of three months, whichever is
longer, without obtaining leave of absence from the Board; (vii) he becomes disqualified
by an order of the court under s.203 which restrains fraudulent persons from managing
companies; (viii) he is removed in pursuance of s.284 by an ordinary resolution of which
special notice was given; (ix) he accepts a loan from the company in contravention of s.295;
(x) he fails to disclose to the Board his interest in any contract entered into by the company
as required by s.299; (xi) if he became the director by virtue of an office, on coming to an
end of that office. A private company may provide additional grounds in its Articles for
vacation of office of a director. If a person functions as a director after the office has

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