Director in default.??

This query is : Resolved

Rahul Mishra (Querist)
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19 December 2013 Dear Sir,

Please Clarify the below mentioned Query:-

Suppose Mr. was a Director in below mentioned company:-
1. ABC PRIVATE LIMITED
2. XYZ PRIVATE LIMITED.

ABC PRIVATE LIMITED

In this Comapny Mr A was appointed on 12.12.2006 as a Director and resigned from his designation on 01.10.2007. Till 31.03.2008 all the Compliances was complete in all respect. After 31.03.2008 no any compliance done by the Company.

XYZ PRIVATE LIMITED

In this Comapny Mr A was appointed on 23.11.2006 (Since Incorporation) as a Director and resigned from his designation on 01.10.2007. Till 31.03.2007 all the Compliances was complete in all respect. After 31.03.2007 no any compliance done by the Company and AGM due date for 31.03.2013 is 30.09.2013 and no AGM was held.

PLEASE CLARIFY THAT MR A WAS IN DEFAULT PERSONALLY. IF YES, WHAT IS THE PROCEDURE FOR REMOVE DEFAULT.

CS. Ashish Shah

CS. Ashish Shah (Expert)
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19 December 2013 hi! Rahul,

Section 5 of the Companies Act, 1956 provides for the Officer in Default.

It provides that following persons will be Officer in default:

1. MD or WTD or Manager
2. Secretary
3. any person in accordance with whose guidance the board is accustomed to act;
4. any person charged by the Board with the responsibility of complying with that provision and
5. where company does not have MD or WTD or Manager then any director or directors specified by the Board or where no director is specified then all the Directors.

For 4 and 5 above, the company requires to file Form 1AA with ROC for declaration of officer in default where specified. In the same was by Form 1AA he will be released from Officer in Default.

In you case, answer is as under:

1. In the first case Mr. A will not be count as Officer in Default as he has resigned before the irregularities of the company i.e. on 01.10.2007 and the irregularities has been started much after 01.10.2007 i.e. 31.03.2008. So in my opinion, Mr. A will not be considered as officer in default in your first company;

2. In second case the irregularities has been started from 31.03.2007 i.e. before his resignation date. So we need to see the followings:

a. whether the company has MD or WTD or Manager - however, as it is a private limited, I think that there will not be any MD or WTD or Manager;

b. now let's examin Clause (g) of Section 5 of the companies Act, 1956 what it says

"where company does not have MD or WTD or Manager then any director or directors specified by the Board or where no director is specified then all the Directors."

So if the company has specified any one or two Directors for compliance of the specific Provisions of the Companies Act, 1956 and taken their consent in writing and filed Form 1AA along with Board Resolution and Consent of Person or Director(s) the that Director(s) will be officer in default otherwise all the Directors will be Officer in Default for the compliance of the provisions of the Companies Act, 1956.