There are many reasons specified in the Companies Act for company directors' disqualification. The act designates company directors as equivalent to officers working for the government. Therefore, it expects them to maintain integrity while conducting operations of the company. If the directors deviate from their responsibilities mentioned in the act intentionally or unintentionally, they will be disqualified from their posts. Let us understand in the following section what happens to a director during disqualification?
Characteristics of Disqualification Process
The director disqualification is ordered by the Registrar of Companies working under the MCA for directors who do not comply with its norms. Disqualification means that the said person won't be appointed in any firm as a director for 5 years and his current position will also be vacated. In simpler terms, it means unemployment and a break in career for 5 long years. The DIN of the said director is deactivated by the RoC and it can only be reactivated if,
- Court orders reactivation of DIN.
- The director pays all the penalties associated with breaking the norms and meets all the compliances.
- Director completes the 5 years exile period and applies for reactivation.
To get the reactivation orders from the court, for removal of director disqualification, a director has to file a writ petition in the court.
Director disqualification has been imposed strictly by the government to curb the use of black money and Benaami companies. This has also been used as a tool to facilitate companies to strictly follow the norms of the Companies Act. If a company fails to comply with the norms continuously, then it can be struck off by the Registrar of Companies. This will also lead to automatic disqualification of directors.
To avoid all of this, all company directors should comply with the rules and regulations. And in case they feel that they have been wrongfully targeted by the RoC due to unintentional fault, then they can always seek legal help. An experienced legal consultant will be able to guide them on the steps to remove disqualification or revive their company.