Section 167 of Companies Act, 2013 – Vacation of office of director

SECTION 167. VACATION OF OFFICE OF DIRECTOR

[Effective from 1st April, 2014]

(1) The office of a director shall become vacant in case—

(a) he incurs any of the disqualifications specified in section 164;

[1] [Provided that where he incurs disqualification under sub-section (2) of section 164, the office of the director shall become vacant in all the companies, other than the company which is in default under that sub-section]

(b) he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board;

(c) he acts in contravention of the provisions of section 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested;

(d) he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of section 184;

(e) he becomes disqualified by an order of a court or the Tribunal;

(f) he is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than six months:

[2] [Provided that the office shall not be vacated by the director in case of orders referred to in clauses (e) and (f)—

(i) for thirty days from the date of conviction or order of disqualification;

(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed of; or

(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed of]

(g) he is removed in pursuance of the provisions of this Act;

(h) he, having been appointed a director by virtue of his holding any office or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company.

(2) If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in sub-section (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

(3) Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section (1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.

(4) A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1).

 

Applicable Circulars

Condonation of Delay Scheme, 2018

 General Circular No. 16/2017 dated 29^th December, 2017

Whereas, companies registered under the Companies Act, 2013 (or its predecessor Act) are inter-alia required to file their Annual Financial statements and Annual Returns with the Registrar of Companies and non-filing of such reports is an offence under the said Act.

Whereas, section 164(2) of the Act read with section 167 of the Companies Act,2013 [the Act], which provisions were commenced with effect from 01.04.2014, provide for disqualification of a director on account of default by a company in filing an annual return or a financial statement for a continuous period of three years.

Whereas, Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014 further prescribes that every director shall inform to the company concerned about his disqualification, if any, under section 164(2), in form DIR-8.

Whereas, consequent upon notification of provisions of section 164(2), Ministry of Corporate Affairs (MCA) had launched a Company Law Settlement Scheme 2014 providing an opportunity to the defaulting companies to clear their defaults within the time period specified therein and following the due process as notified.

Whereas, MCA in September 2017, identified 3,09,614 directors associated with the companies that had failed to file financial statements or annual returns in the MCA21 online registry for a continuous period of three financial years 2013-14 to 2015-16 in terms of provisions of section 1.64(2) r /w 167(1)(a) of the Act and they were barred from accessing the online registry and a list of such directors was published on the website of MCA.

Whereas, as a result of above action, there have been a spate of representations from industry, defaulting companies and their directors seeking an opportunity for the defaulting companies to become compliant and normalize operations.

Whereas, certain affected persons have also filed writ petitions before various High Courts seeking relief from the disqualification.

Whereas, with a view to giving an opportunity for the non-compliant, defaulting companies to rectify the default, in exercise of its powers conferred under sections 403, 459 and 460 of the Companies Act, 2013, the Central Government has decided to introduce a Scheme namely “Condonation of Delay Scheme 2018″ [CODS-2018] as follows.

1.The scheme shall come into force with effect from 01.01.2018 and shall remain in force up to 31.03.2018

2.Definitions – In this scheme, unless the context otherwise requires, –

i.“Act” means the Companies Act,2013 and Companies Act, 1956 (where ever applicable);

ii. ‘overdue documents’ means the financial statements or the annual returns or other associated documents, as applicable, in the case of a defaulting company and refer to documents mentioned in paragraph 5 of the scheme.

iii. “Company” means a company as defined in clause of 20 of section 2 of the Companies Act, 2013;

iv. “Defaulting company// means a company which has not filed its financial statements or annual returns as     required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the Rules rnade  thereunder for a continuous period of three years.

v. “Designated authority” means the Registrar of Companies having jurisdiction over the registered office of the company.

3.Applicability: – This scheme is applicable to all defaulting companies (other than the companies which have been stuck off/ whose names have been removal from the register of companies under section 248(5) of the Act). A defaulting company is permitted to file its overdue documents which were due for filing till30.06.2017 in accordance with the provisions of this Scheme.

4.Procedure to be followed for the purposes of the scheme:- (1) In the case of defaulting companies whose names have not been removed from register of companies,-

i.The DINs of the concerned disqualified directors de-activated at present, shall be temporarily activated during    the validity of the scheme to enable them to file the overdue documents.

ii. The defaulting company shall file the overdue documents in the respective prescribed eForms paying the statutory filing fee and additional fee payable as per section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014 for filing these overdue documents.

iii. The defaulting company after filing documents under this scheme, shall seek condonation of delay by filing form e-CODS attached to this scheme online on the MCA21 portal. The fee for filing application eform CODS is Rs.30,000/- (Rs. Thirty Thousand only).

iv. The DINs of the Directors associated with the defaulting companies that have not filed their overdue documents and the eform CODS, and these are not taken on record in the MCA21 registry and are still found to be disqualified on the conclusion of the scheme in terms of section 164(2)(a) r/w 167(1)(a) of the Act shall be liable to be deactivated on expiry of the scheme period.

v. In the event of defaulting companies whose names have been removed from the register of companies under section 248 of the Act and which have filed applications for revival under section 252 of the Act up to the date of this scheme, the Director’s DIN shall be re-activated only NCLT order of revival subject to the company having filing of all overdue documents.

5.Scheme not to apply for certain documents – This scheme shall not apply to the filing of documents other than the following overdue documents:

i) Form Number 208/MGT-7- Form for filing company having share capital.

ii) Form 21A/MGT-7- Particulars of Annual return for the company not having share capital.

iii) Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC- 4(non-XBRL)             – Forms for filing Balance Sheet/Financial Statement and profit and loss account.

iv) Form 66 – Form for submission of Compliance Certificate with the Registrar.

v) Form 238/ADT-1- Form for intimation for Appointment of Auditors.

6.The Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned Court(s) for all documents filed under the scheme. However, this scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.

7.At the conclusion of the Scheme, the Registrar shall take all necessary actions under the Companies Act, 1956 / 2013 against the companies who have not availed themselves of this Scheme and continue to be in default in filing the overdue documents.

8.The e-Form CODS 2018 would be available from 20.02.2018 or an alternate date, which will be intimated by the ministry on www.mca.gov.in. The stakeholder should complete the necessary procedural requirements and file overdue documents without waiting for the availability of the e-CODS form.

 

[1] Inserted by the Companies (Amendment) Act 2017 vide Notification No. S.O. 1833(E) dated 7^th May, 2018.

[2] Substituted by the Companies (Amendment) Act 2017 vide Notification No. S.O. 1833(E) dated 7^th May, 2018. Prior to the substitution it read as under:

“Provided that the office shall be vacated by the director even if he has filed an appeal against the order of such court;”