Disqualification of Director is a lawful consequence under Section 164 of the Companies Act, 2013 read with Companies (Appointment and Qualifications of Directors) Rules, 2014. It directly affects corporate governance, compliance, and even its ability to carry on business properly. In many cases, companies suffer long-term operational and legal consequences because one or more of their directors become disqualified under Companies Act,2013.
Understanding the law, provisions and its consequences, and the legally prescribed procedure to remove disqualification of director under Companies Act,2013 is crucial for companies, professionals, and entrepreneurs.
Disqualification of Director is a restriction imposed by law on an individual which prevents directors from being appointed or continuing as a director in any company under Companies Act,2013.
Once disqualified, the director loses the legal right to manage or represent any company for the specified period.
Legal Provisions Governing Director Disqualification
The law, about stopping people from being company directors is mainly decided by:
- The Companies Act of 2013 has a section, section 164 and this section 164 says what can disqualify someone from being a director of a company these are the grounds for disqualification of a director, under section 164 of the Companies Act, 2013.
- Section 167 of the Companies Act 2013 is a part of the law that says what happens when someone in a Company has to leave their job because they are not allowed to be in that position this is called vacation of office due to disqualification of the Company people. The Companies Act 2013 has this rule to make sure that the people running the Company are doing a job and following the rules. When someone is disqualified they have to leave their office as, per Section 167 of the Companies Act 2013.
Grounds for Director Disqualification under Section 164
A. Disqualification due to Company Defaults – Section 164(2)
A director of a company becomes disqualified from being a director for a period of five years if the company in which the director is a director has problems. The director of the company will not be allowed to be a director of any company for five years if the company in which the director is a director has these issues.
- The company in which the director is a director does something
- The company in which the director is a director is not following the rules
The director of the company will be disqualified from being a director for five years if the company in which the director is a director’s, in trouble.
- The company has not filed its statements or annual returns for three years in a row or the company has missed filing financial statements or annual returns for any three financial years that are continuous.
- Failed to repay deposits, debentures, dividends or interest thereon
When a company does not do what it is supposed to do something bad happens. All the directors of the company except the ones who were appointed after this bad thing happened are not allowed to be directors. This happens even if they did not personally do anything. The directors of the company are the ones who are affected even if the directors of the company did not cause the problem themselves.
B. Personal Disqualifications – Section 164(1)
A person cannot be a director if they have done things. For example,
- The person is disqualified because of something they did
the person is also disqualified from being a director if the person does not meet the requirements to be a director.
The person is not allowed to be a director if the person has problems that make it so the person cannot be a director.
A person is also disqualified from being a director if the person has done something that stops the person from being a director.
- Is of unsound mind
- Is an undischarged insolvent
- They have been found guilty of a crime that is considered bad and goes against what people think is right like a crime involving moral turpitude. This is a matter and it is about the person who has been convicted of an offence involving moral turpitude. The crime of turpitude is something that people do not approve of and it is, against the law. When someone is convicted of an offence involving turpitude it means they have done something very wrong.
- The person has not paid for the calls on the shares. They still have to pay for the shares they own. The company is waiting for the payment for the shares. The person needs to pay for the calls on the shares soon, as possible.
- The person has been disqualified by a court or tribunal because of something they did wrong. A court or tribunal is like a group of people who make big decisions. The court or tribunal has the power to make these kinds of decisions about people, like this person who has been disqualified.
Consequences and Effects of Director Disqualification
When a director gets disqualified, the company has to deal with a lot of problems. The law takes this seriously and there are many legal consequences that the director and the company have to face. Being a disqualified director is an issue and it can cause a lot of trouble for the director and the people, around them.
The company and the disqualified director have to be very careful because the legal consequences of being a director are very serious.
- The director of a company cannot be appointed to that company or re-appointed to the company. This rule applies to the director. It means the director is not allowed to become the director of that company again or for the first time. The company has to find a director. The director is not an option, for the company.
- When we look at Section 167 it says that the director has to leave their position in all the companies they’re a part of except, for the one company that is having problems and not following the rules, which is called the defaulting company. The director must vacate office in all these companies but they can still stay in the defaulting company.
- The Director Identification Number of the director is not working anymore the Director Identification Number is deactivated.
- The director is not allowed to sign things, like MCA filings or documents that the board of the company has agreed on or other important papers that have to do with the law and the company like documents and the company’s MCA filings.
How to Remove Director Disqualification?
The Director disqualification under Section 164(2) is not something that will last forever. It is possible to have the Director disqualification removed. The Director disqualification can be taken away through compliance, with the rules.
Step 1 – Filing all pending statutory returns
The company has to send in all the reports that’re late including:
- AOC-4 (financial statements)
- MGT-7 or MGT-7A (annual returns)
- Payment of all additional fees and penalties
This clears the default thing that caused the disqualification of the application. The default is the thing that caused the problem. This clears it so the application is okay now.
Step 2 – DIN Reactivation
When all the paperwork is done the director has to ask for the DIN to be turned on by:
• Filing DIR-3 KYC, or
• Submitting a representation to the ROC
After we check everything the Registration Office Computer restores the Document Identification Number.
Step 3 – Re-appointment of Director
After DIN activation:
- The director has to be chosen by the shareholders of the company so the shareholders of the company will decide if the director will get to keep their job. The director will only be able to stay on if the shareholders of the company say it is okay.
- The document called DIR-12 has to be submitted to the Registrar of Companies.
The director is, in charge again after this happens. The director gets to make decisions. Has the power to do things after this is all done. This is when the director regains authority.
Important Legal Position and Judicial View
The law says that if a company breaks the rules under Section 164(2) it can be disqualified. This does not mean the company is, in trouble forever. If the company fixes the problem and follows the rules then it should not be disqualified anymore. Courts have made decisions that support this idea. They think that if a company does what it is supposed to do then it should be allowed to continue operating. The disqualification is not meant to be a punishment.
When the company gets its filings in order and the Director Identification Number is restored the director of the company is legally allowed to be a director. The director of the company has to wait until the company finishes its filings and the Director Identification Number is working again then the director of the company can be a director, without any issues.
Practical Significance for Companies
Director disqualification affects:
- ROC compliance
- Banking and financial transactions
- Legal representation
- Investor confidence
- Business continuity
Hence, early correction of defaults is crucial.
Why Choose My Legal Business LLP to Remove Director Disqualification?
Expertise in Company Revival Matters
We specialize in revival of struck-off companies, including cases involving director disqualification.
End-to-End Compliance Support
From assessing disqualification to NCLT filing and post-revival compliances — we handle everything.
Strategic Legal Approach
We don’t just file applications; we build strong legal grounds to maximize approval chances.
Transparent & Professional Service
Proper and clear communication, timely updates, and compliance-focused execution.
Frequently Asked Questions (FAQs)
1. Does revival of a struck-off company automatically remove director disqualification?
No. Revival of a company and removal of director disqualification are treated as separate legal processes under the Companies Act, 2013.
2. What happens to a director who was disqualified. Can this person still act for the company if the company is revived?
No, a disqualified director is not allowed to do anything. They cannot act on behalf of the company they cannot sign any documents and they cannot file any forms, with the Registrar of Companies until the time they are disqualified is over.
3. Do you have to appoint a director when a company is going through the revival process?
If all the existing directors are not allowed to be directors the company needs to appoint a new director who is eligible to do the job.
4. What is the usual period of director disqualification?
Director disqualification is typically, for five years unless something else is decided by a court or tribunal.
5. What happens if a director wants to get out of being disqualified before the five years are over can they do that?
Relief may be available in specific cases through judicial remedies, subject to facts, compliance status, and tribunal discretion.
6. What things does the company have to do to follow the rules after it starts operating ?
The company needs to make sure it follows all the compliances that are required after the revival of the company. The company has to file all the returns that it did not file. It also has to give its statements. The company has to pay the fees that it has to pay.
7. Is professional assistance required for revival and director disqualification matters?
Professional assistance is strongly recommended because of this complexity. It is a good idea to get some help from a professional who knows what they are doing with the technical and legal things.
8. What happens if a director gets disqualified. Can this director still incorporate a company?
No a disqualified director is not allowed to start a company or become a director in any other company while they are disqualified.
9. What happens to the Director Identification Number when a director is disqualified. Does it affect the Director Identification Number forever?
It just stays inactive when it comes to being a director, during the time the person is disqualified. The Director Identification Number will still be there it is just not being used for directorship purposes.
10. What happens if the directors of a company are disqualified. Can the shareholders or creditors of the company still apply to have it revived?
This is possible even if the directors of the company are not allowed to be directors. The NCLT will consider the revival application, from shareholders or creditors and other people who’re unhappy.
11. What happens to the contracts of the company when the director is disqualified? Does the director disqualification affect the company’s contracts?
Yes. If a company is disqualified it can cause problems, with the execution of contracts the way they do their banking and the way they follow the rules until they have directors who are doing things correctly.
12. If a company is revived does that mean the director is no longer disqualified from being a director of the company? Does the revival of the company remove the disqualification of the director?
The thing, about revival and director disqualification is that they are two things. Director disqualification is something that has to be figured out on its own. It has to be done according to the law. The law says that this has to be done. So director disqualification has to be resolved by itself. It has to follow the law.
13. What happens if a director gets disqualified can this director still file a petition to revive the company?
A director who is disqualified cannot do things. Sign things for the company. The company needs to do some things to make it right.
14. Do you think the National Company Law Tribunal will say no to helping a company because one of its directors is not allowed to be a director?
The Tribunal does not have to say yes. If the Tribunal thinks that the company should be brought back, to life then the Tribunal may say okay. Only if the company does what the Tribunal says. The Tribunal will only allow the company to come back if it is really necessary.
15. Is professional certification required for revival?
Yes. Proper legal drafting, affidavits, and compliance documents are essential.
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