Section 164: Disqualifications for appointment of director
This section lists the reasons why someone may not be eligible to be appointed as a director of a company.
The section, clause by clause
What the section says
In plain terms
(1)A person shall not be eligible for appointment as a director of a company, if —
A person cannot be a director of a company if they have certain issues such as being of unsound mind, an undischarged insolvent, or having been convicted of an offence with a sentence of not less than six months and it has been less than five years since the sentence ended.
(1)(a)he is of unsound mind and stands so declared by a competent court;
(1)(b)he is an undischarged insolvent;
(1)(c)he has applied to be adjudicated as an insolvent and his application is pending;
(1)(d)he has been 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 and a period of five years has not elapsed from the date of expiry of the sentence:
provisoProvided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
(1)(e)an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(1)(f)he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(1)(g)he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
(1)(h)he has not complied with sub-section (3) of section 152.
(1)(i)he has not complied with the provisions of sub-section (1) of section 165.]
(2)No person who is or has been a director of a company which—
A person who is or was a director of a company that has not filed financial statements or annual returns for three years, or failed to repay deposits or pay dividends for one year or more, cannot be a director of that company or any other company for five years.
(2)(a)has not filed financial statements or annual returns for any continuous period of three financial years; or
(2)(b)has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so: 1[Provided that where a person is appointed as a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment.]
(3)A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2).
A private company can have its own additional rules for who cannot be a director, on top of the standard rules.
proviso2[Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification.]
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Ins. by Act 22 of 2019, s. 26 (w.e.f. 2-11-2018).
- 1. The proviso ins. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 2. The proviso subs. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).
- 3. The Explanation renumbered as Explanation I thereof by s. 53, ibid. (w.e.f. 9-2-2018).
- 4. Ins. by s. 53, ibid. (w.e.f. 9-2-2018).
- 5. Subs. by Act 29 of 2020, s. 33, for sub-section (6) (w.e.f. 21-12-2020).
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Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.