What Happens If a Director Becomes Disqualified Under Section 164?

Director Disqualification under Section 164 arises when a director fails to comply with legal duties prescribed under the Section 164 of Companies Act. It ensures that only compliant & responsible individuals manage companies in India.

Today, In this Article we will Look at Director Disqualification under Section 164 on filesure.

What is Section 164 of the Companies Act ?

Section 164 of Companies Act lays down the conditions under which a person becomes disqualified from being appointed or reappointed as a director.

Key Purpose of Section 164:

• Ensures accountability of directors.

• Discourages repeated non compliance.

• Strengthens trust of investors & regulators.

• Improves governance standards.

This section applies to all companies registered in India including private limited companies & public limited companies.

What Happens If a Director Is Disqualified?

What Happens If a Director Is Disqualified is a common concern among professionals & business owners.

Immediate Effects of Disqualification

• Directors must vacate offices in defaulting companies.

• Directors cannot be appointed in other companies.

• DIN gets deactivated.

• The director faces restrictions for five years.

It explains that the director role effectively ends until the disqualification period expires or legal relief is granted.

What are the Reasons for Director Disqualification under Section 164?

The understanding of the reasons for director disqualification helps companies avoid serious compliance failures.

Major Causes of Disqualification:

• Director disqualification due to non filing of financial statements.

• Failure to file annual returns for continuous three years.

• Non repayment of deposits or interest.

• Default in payment of debentures.

• Violation of statutory obligations.

These triggers often arise due to weak compliance monitoring & not due to intentional misconduct.

What are Consequences of Director Disqualification ?

Legal & Professional Consequences:

• Director cannot be appointed in any company.

• Director loses authority to sign documents.

• Director credibility reduces in corporate records.

These consequences highlight the seriousness of compliance responsibilities.

What are the Effects of Section 164 Disqualification on a Company?

Impact of Director Disqualification on Company:

• The board loses experienced leadership.

• The decision making process slows down.

• Companies may struggle with banking & funding.

• Company reputation is affected.

They often face operational delays until new eligible directors are appointed.

Disqualified Director in India Legal Status

A Disqualified Director in India faces strict legal restrictions under the Companies Act.

Legal Position of a Disqualified Director:

• The person remains disqualified for five years.

• A person cannot act as director or rejoin boards.

• A Person remains associated with earlier defaults.

It applies regardless of the nature or size of the company.

How to Remove Director Disqualification?

How to remove director disqualification depends on the reason & legal remedy available.

Common Remedies:

• Filing of pending statutory returns.

• Compounding of offences.

• Approach to the High Court or NCLT.

• Correction of compliance defaults.

They may provide legal relief in genuine cases based on facts.

Important Differences before & after Disqualification

It shows the clear difference once disqualification applies.

Conclusion

Director Disqualification under Section 164 acts as a strong compliance control under Indian corporate law. Director Disqualification under Section 164 affects directors & company operations governance & credibility. It covers DIN restrictions, loss of directorship & reputational damage with long lasting effects. The understanding of the Section 164 of Companies Act along with regular compliance monitoring helps directors & companies avoid legal setbacks.

Also Read : How to Identify and Avoid a Non-Compliant Company Before Partnering