A company is an artificial person and cannot function on its own and requires a natural person who can manage its activities as a result “Directors” are appointed to manage the affairs of the company. In this article, we will deal with how the appointment of a director is done in a company.
It is important to know what is the eligibility to become a director of a company. But there is no specific mention of eligibility mentioned in the Indian Companies Act,2013 but disqualifications are mentioned in the Companies Act. It is given under Section 164(1) of the Companies Act,2013. Following are the disqualification given under the Act-
Declared unsound by a competent court.
Who is an undischarged insolvent.
Has a pending application to be adjudicated as insolvent.
convicted for any offense by a competent court and sentenced to imprisonment for not less than six months and five years has not passed from the date of expiry of the sentence.
Convicted for an offense and sentenced to imprisonment for seven years or more.
An order has been passed by a court or tribunal disqualifying him for an appointment as a director.
Six months have passed since the last call but has not fully paid the share money held by him in respect of any shares of the company.
Who has not complied with section 152(3).
Who has not complied with section 165(1).
Who has been convicted for an offense under Section 188 at any time during the last preceding five years.
As we know a director can be reappointed in a company but there are no qualifications mentioned in the Companies Act,2013 for reappointment but Section 164(2) deals with disqualification. Following are the disqualifications for reappointment-
Any director who has not filed annual returns or financial statements for a continuous period of three financial years.
Any director who has failed to repay the deposits accepted by it or has failed to pay interest or redeem any debentures and such failure to pay or redeem continues for one more.
What is the time period for disqualification?
The director shall remain disqualified for five years if the disqualification is on the basis of clause 2.
What are the additional disqualifications of a director?
In the case of a private company, a private company can provide additional disqualifications by providing it in its Articles of Association. Section 164(3) gives power to a private company.
Retirement of directors-
Section 152 (6) (7) of the Companies Act provides for the rotational retirement of directors.
According to Section 152(6), a public company must appoint such directors whose term is determined by rotational retirement in its general meeting. Such directors must be 2/3rd of the total directors of the company. It is not mandatory that a company should fix a total number of retiring directors to be 2/3rd of the total, a company can appoint all of its directors as retiring directors by adhering to its Articles of Association. But if nothing is specified in the Articles of Association at least 2/3rd of directors must retire by rotation. The retired directors can be reappointed again and there is no bar for it.
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