How to Remove Disqualification of Director?

Short Summary

In this Flash editorial, the author begins by referring the provisions of Interim Stay on Disqualification of Director. High Court as per the latest judgments in August 2020 pronounced “Interim Stay” on the disqualification of Directors, which will help the directors to activate their DIN from the ROC.

Provisions

As per the Companies Act, 2013, once a director is disqualified u/s 164(2) the director so disqualified shall continue to be disqualified for a period of 5 years. Even the power is not vested with the NCLT, Regional Directors, Registrar of Companies to remove the disqualification of Directors.

However, in the last 2-3 years, several writ petitions have been filed with the Hon’ble High Courts of India for the removal of the Disqualification of Directors. The Hon’ble High Court has passed several orders for the ‘interim stay’ on the disqualification until the issuance of the final order from the Hon’ble Supreme Court.

Process of Activation of DIN

The following process has to be followed to obtain a stay from the Hon’ble High Court on the disqualification of Directors and the Activation of the DIN from the Registrar of Company: –

STEP – I: Drafting of a Writ Petition

• The disqualified person shall draft a writ petition including:
• Facts of the Disqualification
• Reason for the relief from the disqualification etc.
• The disqualified person shall prepare an affidavit verifying the petition.
• The disqualified person shall authorize any professional for filing of the writ petition with the High Court.

STEP–II: Filing of a Writ Petition

• The Authorized person shall file the writ petition with the Hon’ble High Court
• The Hon’ble High Court shall provide a date of hearing.
• An interim stay order shall be provided from the disqualification if, after the hearing, The Hon’ble High Court is satisfied on the grounds of the petition.

STEP-III: Filing of the copy of the Order with the Registrar of the Company

• The disqualified person shall prepare an application regarding the High Court Order.
• Based on the High Court order, the Registrar of Companies shall change the status of the DIN from ‘disqualified’ to ‘Active’.

Note: If the disqualified director has not filed the DIR-3 KYC at the present date, then the ROC shall change the status of the DIN as “Deactivated due to the non-filing of DIR-3 KYC”.

The disqualified director can file e-form DIR-3 KYC with the ROC and can get the status of DIN as “Active”.

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

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