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Ministry of Corporate Affairs had disqualified around 3,09,000 directors that failed to comply with the rules and regulations specified u/s 164(2) & 167(1)(a) of the Company Act. as a result, the MCA has blocked Director Identification No of all the disqualified directors.
Thereafter lot of aggrieved directors & many companies came out seeking to find out a solution of that. Finally, the Govt of India came out with the ‘Condonation of Delay Scheme’ wherein it provides a chance to file the required documents & safeguard their current position of disqualified Director.
As parsec 92 of the Companies Act, 2013 provides that every company shall prepare an annual return in the prescribed form. The annual return shall be signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice. Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held.
If a person —
He/she shall also not be eligible to be re-appointed as a director of that company or any other company for a period of five years from the date.
As par sec164 (2) provides that no person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years 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.
Sec- 167(1) (a) provides that the office of a director shall become vacant in case he incurs any of the disqualifications specified in sec-164 i.e., failure to file annual returns for any continuous period of three financial years.
Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that every director shall inform to the company concerned about his disqualification, if any, under section 164 (2) in Form DIR – 8.
The Ministry of Corporate Affairs in September 2017 identified 3, 09,614 directors associated with the companies that had failed to file the financial statements or annual returns in the MCA 21 online registry for a continuous period of three financial years 2013 – 14, 2014 – 15, 2015 – 16 in terms of provisions of section 164(2) read with section 167 (1) (a) of the Act and they were barred from accessing the online registry. A list of such directors was also published on the website of Ministry of Corporate Affairs.
Condonation of Delay Scheme:
U/s 8 of the company Act 2013, All incorporated company has to submit its financial returns every year with Ministry of Corporate Affairs. Under the company Act 2013, any company or the director of such company has failed to do the same for the last three years could be disqualified on the same grounds, wherein the company would get the status of ‘Strike off’ from ‘Active’ and for any director, it would lead to its disqualification.
‘Condonation of Delay Scheme’ was operational from 1st Jan to 30th April under which temporary activation of DIN would take place and he/she can file all the required documents under the scheme. Failing to do so would lead during this period, would lead to disqualification of a director for the coming Five Years.
Condonation of delay scheme, 2018: Consequent of the action made by MCA disqualifying the directors of the companies, there has been a spare of representations from industry, defaulting companies, and their directors.
The Ministry of Corporate Affairs has announced a one time settlement scheme for companies that saw over three lakh directors disqualified from their boards, with a view to giving an opportunity for the non-compliant defaulting companies to rectify the default
This scheme is applicable to all defaulting companies, other than the companies which have been struck off or whose names have been removed from the register of companies under section 248(5) of the Act. A defaulting company is permitted to file its overdue documents which were due for filing till 30.06.2016 in accordance with the provisions of this scheme.
The expression ‘defaulting company’ is defined as a company which has not filed its financial statements or annual return as required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the Rules made there under for a continuous period of three years.
The expression ‘overdue documents’ is defined as the financial statements or the annual returns or other associated documents, as applicable, in the case of a defaulting company.
The following are the overdue documents-
Case 1: Without Condonation of Delay Scheme
Sub Case 1: Company was not functioning
Sub Case 2: Company was functioning
Case 2 : With Condonation of Delay Scheme
The prompt thing that must be done by promoters after a director has been disqualified shall be to file all pending ROC returns. Finally, after disqualifying the directors of a Company,, they would be barred from filing any pending Ministry of Corporate Affairs Annual financial statement along with returns to complete agreement up to date.
Due to that, the current Director should therefore be supposed to execute resolutions to assign the new director in the company. The existing directorates are also prevented from signing a new Director application for director appointment with the MCA as they are disqualified or not eligible to do so.
To prevent it, the Directors together with a via CA or CS Professional would have to advance to the concerned ROC for the appointment of Director through the Ministry of Corporate Affairs back end.
Annual Return under Condonation of Delay Scheme:
What is the Filing applicable on Annual Return under Condonation of Delay Scheme? The Directors of a defaulting company can file the following forms relating to the appointment of Auditor and annual return:
Director Identification No (DIN) is a unique number allocated to both the existing director or would-be director of any existing company incorporated under section 266A & 266G of the Act,2006.
The idea of Director Identification No was to create of all the directors on an individual basis so that any case of any wrongdoing be prevented & if any such is done, it could be tracked within the timeline.
No process has been taken until the end of the last 5 Years before the Ministry of Corporate Affairs to appoint a Disqualified Director, a Director again. But all employees are still awaiting a process to remove disqualifications after the necessary compliance and payment of a penalty has been made available to the Ministry of Corporate Affairs.
The removal of a Director is not always a simple process, but it is occasionally obligatory to defend the interests of the company. For shareholders with Directors, it is essential to remember that when trying to release a Director they deal with a person, and therefore a conflict of duties is always possible.
It can be concluded that since the Companies Act 2013 does not appear to be a feasible solution, the complaint Director under Article 226 of our Constitution is permitted to make a written petition to the High Court in order to provide a backup cure accessible.
Whether shareholders will decide to remove them, apply to the ASIC or talk with the director about the issues, we should consider the route of the least resistance.
Recording concerns and the process is an easy way to protect against risks and to preserve transparency. So once a director is unable to qualify for 164(2), it can be stated that he shall continue for 5 years of age. The promoters must appoint new directors for the smooth operation of the company in Active Companies.
In the event that a director of a struck-off company wishes to take advantage, or to remove his disqualification from Condonation of Delay Scheme-2018, a written petition for the same may be submitted at Hon’ble High Court.
Particulars | Under The High Court | Under Condonation of Delay Scheme (CODS) |
| The functionality of the Company
| Non-Operational
| Operational
|
| Status of the Company
| Struck-Off
| Active/Struck Off
|
| Mode of Application
| Petition to the court
| Application with NCLT(or Direct e-CODS)
|
| Chances of Revival
| Less chances
| Quite Good or More chances |
| Fee Charged
| Little More | Economical or Less
|
The scheme shall come into force with effect from 01.01.2018 and shall remain in force up to 31.03.2018.
The Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned court(s) for all documents filed under the scheme.
This scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.
At the conclusion of the scheme, the Registrar shall take all necessary actions under the respective Act against the companies who have not availed themselves of this scheme and continue to be in default in filing the overdue documents.
CHECK YOUR DIN STATUS HEREhttps://www.mca.gov.in/mcafoportal/showEnquireDIN.do
Q 1.: Is any disqualified director Act as A Shareholder In the Company?
Ans: Yes, Irrespective of whether a disqualified director has disqualified under section 164 of the Act of vacated the office under section 167 of the Act, he/she can continue to be a shareholder of the company.
Q2.: What Is a basic Course of Action for any Individual Once He/She Has Served 5 years of Disqualification?
Ans: The individual will have to make an application to the Registrar of Companies in form of DIR-10 as per rule 14(5) of the Companies Act asking for the removal of his/her name from the list. But such application can be made only after the completion of five years.
Q3 : What Will Happen If All the Directors Are Disqualified Under The ‘Condonation of Delay Scheme’?
Ans. : If for a company any such case arises, either a Promoter or the Ministry of Corporate Affairs (only in absence of a promoter) shall appoint a required number of directors till the time directors are not appointed in the general meeting.
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