Director disqualification

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 January 2015 A Director of Pvt Ltd Co not filed any returns for FY 2010-11, Fy2011-12, Fy2012-13, FY 2013-14 now i want to know whether Director is disqualified if he Incorporate new company and become his Director???

What will be the situation if he closes the old company by Easy Exit Scheme and incorporates new company???

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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02 January 2015 Any person who is or has been director of any company which has not filed any financial statements and Annual Return for 3 continuous financial year shall not be eligible
for appointment as director of any public company and for reappointment in the same company for a period of five years from the
date on which the said company fails to do so.

Querist : Anonymous

Querist : Anonymous (Querist)

07 January 2015 I am talking of effect after Closing the company in Easy Exit Scheme in case of Pvt Ltd Co

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Under the Companies Act, 2013, the disqualification of a director primarily arises from non-filing of annual returns and financial statements for a continuous period of three financial years. Here's how the situation would typically unfold based on your scenario:

1. **Disqualification due to Non-filing:**
- If a director has not filed annual returns and financial statements (Form AOC-4 and Form MGT-7) for the financial years FY 2010-11, FY 2011-12, FY 2012-13, and FY 2013-14, they would be disqualified under Section 164(2) of the Companies Act, 2013.
- Once disqualified, the director cannot be appointed or continue as a director in any company until the period of disqualification is over.

2. **Incorporating a New Company:**
- If the director is disqualified due to non-filing of annual returns and financial statements, they cannot incorporate a new company or become a director in any existing company until the disqualification is removed.
- Any new company incorporation that involves the disqualified director would be invalid under the law.

3. **Effect of Easy Exit Scheme:**
- The Easy Exit Scheme, also known as Fast Track Exit Scheme (FTE), allows for the closure of defunct companies with minimal formalities. If the old company is closed under this scheme:
- The closure process under FTE does not remove or waive the disqualification of directors.
- Disqualification remains in effect until the concerned director complies with the filing requirements for the past financial years or obtains relief from the National Company Law Tribunal (NCLT).

4. **Resolution of Disqualification:**
- To resolve the disqualification, the director or the company needs to file all pending annual returns and financial statements with additional fees.
- Alternatively, the director can apply to the NCLT for relief from disqualification under Section 167 of the Companies Act, 2013. The NCLT has the authority to grant relief based on the circumstances of the case.

In conclusion, the director remains disqualified from being appointed or continuing as a director in any company until the disqualification is rectified by either filing overdue returns or obtaining relief from the NCLT. Simply closing the old company under the Easy Exit Scheme does not remove the disqualification. Therefore, the director cannot incorporate a new company or hold a directorship position until compliance with the Companies Act, 2013, is achieved.