Over last few years MCA or Ministry of Corporate Affairs has disqualified many of the Directors for not performing or meeting the compliance i.e. Rules or regulations mentioned under Companies Act, 2013. However, you can obtain you position back as the Director of the Company. MCA has also deactivated their Director Identification number, so to revive back their is one scheme which is introduced by the MCA i.e. “ Condonation of Delay Scheme”, that provides relief to the Directors by aiding them with the provisions to remove Director Disqualification.
Reasons for Director Disqualification
There are two reasons for Director Disqualification and they are as follows-
- The Directors haven’t filed the annual return or Financial statements from last three consecutive years.
- The Directors have not repaid the debts he has taken or has failed to do so from 1 year.
Once a Director is disqualified, then he won’t be able to become a Director of any company for at least 5 years, however, condonation of delay scheme can help.
What is Condonation of Delay Scheme
According to section 8 of the companies Act, Directors of the company must file annual returns or financial returns every year, and if they fail t do so from the last 3 continuous consecutive years, then they are declared as disqualified Directors. The condonation of delay scheme then became operational courtesy of the appeal of aggrieved Directors. Under this scheme the Directors are given Directors Identification Number (DIN) to file the deferred tax returns over the course of next few months, and after the scheme still they are not able to file the returns then they are declared as disqualified for the next 5 years.
How does scheme work?
When a Director is disqualified, they won’t be able to become Director of any company for the next 5 years. Therefore the company can appoint temporary Directors to execute the resolutions to file and submit the financial statements and annual returns. These Directions are given new DIN and DSC for the time being to file all the annual returns. Furthermore, thees new Directors who shall pass the resolution to pass the resolution to re-hire the disqualified ones and passing the request to the Registrar of companies.
Director disqualification removal process
- Drafting a written application
- Filing the Director disqualification matter with the High court.
- The Advocates appear before the high court regarding Director disqualification.
- Obtaining the final order from the High court.
- Filing all the financial and annual compliances with the Registrar of companies.
- Activation of DIN and removal of director disqualification.
What are the Documents required for Director disqualification?
There is one thing to remember that there is a way to remove Director disqualification
Without the condonation of delay scheme (CODS). However CODS to make the process quite streamlined.
With CODS, documents required are as follows-
- Overdue Documents
- E-Cods
Without CODS, documents required are as follows-
- If company was active
- An Application before the National Company Law Tribunal
- The documents that are overdue
- E-cods on MCA 21 portal.
- If company was inactive
- Petition to the High court
- Overdue documents
- E-cods on MCA 21 portal
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