Disqualification u/s 274(1)(g)

Others 1702 views 5 replies

sumit

CA student

203 Points Joined February 2008

274. Disqualifications of directors

(1) A person shall not be capable of being appointed director of a company, if-

[(g) such person is already a director of a public company which,-

(A) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first date of April, 1999; or

(B) has failed to repay its deposit or interest thereon on due date or redeem its debentures on done date or pay dividend and such failure continues for one year or more :

Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of five years from the date on which such public company, in which he is a director, failed to file annual accounts and annual returns under sub-clause (a) or has failed to repay its deposit or interest or redeem its debentures on due date or pay dividend referred to in clause (b).]

Kindly clarify whether a director disqualified u/s 274(1)(g) can be appointed director of a private ltd. co??

The Sec. begins by stating that a person shall not be capable of being appointed director of a company.

Although Sec. 274(1)(g) does state that such person cannot be appointed as director of another public co. for 5 years.

But does that mean that he can be appointed as director of private co.??

The book i'm referring for law also states that such a person shall be disqualified from being appointed as director of public co.

Is this view correct. If yes, pls state reasons for the same.

Replies (5)

CS Ekta

Company Secretary

309 Points Joined September 2008

Hi Sumit,

274(1)(g) does not apply to Private Companies

For details please refer the link given below:

/forum/messages/2009/4/30216_sec_274_1_g.asp

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

You may appoint such director in other private companies as 274(1)(g) does not apply to Private Companies.

Priya Sharma

Company Secretary & Student.MBA

998 Points Joined January 2009

Is it necessary for the director of a private company to file form DD-A as per section 274 1(g), with the Company in which he is a director?

Please suggest..

Regards

Priya Sharma

CA Ravi Vyas

Business

34 Points Joined March 2009

SEC 274(1)(g) does not apply on Private Companies so disqualified director may appoint as director of private company.

Ajay Mishra

Company Secretary

74352 Points Joined March 2009

· APPLICABILITY

The disqualification stated in clause (g) is confined to directors of Public company only.

The word used in section 274(1)(g) is appointment. Wherever the Legislature has intended that the word appointment should include re-appointment. A proviso to Rule 3(b) provides that both the disqualifications would apply to appointment and re-appointment of a director.

· EXEMPTION

Even though powers have not been delegated to the Government to accord the exemptions, Government companies are exempt from the applicability of section 274(1)(g). The Private Companies are also exempt from the applicability of the Disqualification of Directors Rules, 2003.

Nominee directors appointed on the Board of assisted concern or other public companies by (a) public financial institution within the meaning of section 4A of the Companies Act, 1956; (b) Central or State Government; and (c) banking companies are also exempt from the provisions of section 274(1)(g) of the Companies Act, 1956.

It may be noted that nominee directors appointed by the public financial institutions and banks constituted under Central enactment and director appointed by BIFR under section 16(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 or by Central Government will not attract this disqualification.

Rule 8A has been inserted by Notification No GSR 133(E) dated 3-3-2006, which provides that an application can be made to the Central Government in e-Form-DD-C for seeking exemption from disqualification of a director.

This disqualification will not apply to small shareholders’ director because Rule 5 of the Companies (Appointment of Small Shareholders’ Directors) Rules, 2001 has not included this in the list of disqualification applicable to such director.