Director's Disqualification Under Section 164: What Every Company Director Must Know
Section 164 of the Companies Act 2013 deals with disqualification of directors. In 2017, MCA disqualified over 3 lakh directors in a single sweep. In 2024, another round of disqualifications happened. Here is what you must know to protect yourself.
GROUNDS FOR DISQUALIFICATION UNDER SECTION 164(2)
A director is disqualified if the company in which they are a director:
- Has not filed financial statements (AOC-4) for THREE consecutive years, OR
- Has not repaid deposits/interest for ONE year, OR
- Has not paid dividend for ONE year, OR
- Has not redeemed debentures for ONE year
If any of the above applies, the director is disqualified from being appointed as director of ANY company for 5 years.
THE CRITICAL POINT MOST DIRECTORS MISS
The disqualification is not limited to the defaulting company. If your company defaults on annual filings for 3 years, YOU cannot be a director in ANY other company for 5 years. This catches directors who hold positions in multiple companies.
HOW TO CHECK YOUR DISQUALIFICATION STATUS
Go to MCA portal → MCA Services → Director KYC → Check DIN status
Or search your DIN in the disqualified directors list published by MCA.
WHAT TO DO IF DISQUALIFIED
Section 164(2) disqualification has a remedy under Section 167 for strike-off companies — NCLT petitions have been filed successfully. But it is expensive and time-consuming.
Better approach: Prevention.
PREVENTIVE CHECKLIST FOR EVERY DIRECTOR
1. Maintain a filing calendar for ALL companies where you are a director
2. Do not remain a director on a dormant company if it is not filing annual returns — resign properly (DIR-11) and ensure the company files DIR-12
3. Check your DIN status every 6 months on MCA portal
4. If a company is becoming non-operational, initiate strike-off properly (STK-2) rather than letting it drift into default
5. Keep your DIR-3 KYC updated annually (due 30th September every year)
The MCA's data matching has improved substantially. Disqualification notices are now system-generated based on filing defaults — there is no manual discretion. Compliance is the only protection.
GROUNDS FOR DISQUALIFICATION UNDER SECTION 164(2)
A director is disqualified if the company in which they are a director:
- Has not filed financial statements (AOC-4) for THREE consecutive years, OR
- Has not repaid deposits/interest for ONE year, OR
- Has not paid dividend for ONE year, OR
- Has not redeemed debentures for ONE year
If any of the above applies, the director is disqualified from being appointed as director of ANY company for 5 years.
THE CRITICAL POINT MOST DIRECTORS MISS
The disqualification is not limited to the defaulting company. If your company defaults on annual filings for 3 years, YOU cannot be a director in ANY other company for 5 years. This catches directors who hold positions in multiple companies.
HOW TO CHECK YOUR DISQUALIFICATION STATUS
Go to MCA portal → MCA Services → Director KYC → Check DIN status
Or search your DIN in the disqualified directors list published by MCA.
WHAT TO DO IF DISQUALIFIED
Section 164(2) disqualification has a remedy under Section 167 for strike-off companies — NCLT petitions have been filed successfully. But it is expensive and time-consuming.
Better approach: Prevention.
PREVENTIVE CHECKLIST FOR EVERY DIRECTOR
1. Maintain a filing calendar for ALL companies where you are a director
2. Do not remain a director on a dormant company if it is not filing annual returns — resign properly (DIR-11) and ensure the company files DIR-12
3. Check your DIN status every 6 months on MCA portal
4. If a company is becoming non-operational, initiate strike-off properly (STK-2) rather than letting it drift into default
5. Keep your DIR-3 KYC updated annually (due 30th September every year)
The MCA's data matching has improved substantially. Disqualification notices are now system-generated based on filing defaults — there is no manual discretion. Compliance is the only protection.
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Disclaimer: This content is the author's personal opinion and analysis. It does not constitute professional tax or legal advice. Consult a qualified professional for specific advice on your situation.
Comments (3)
The dormant company trap is so common. So many founders have a forgotten old company sitting there.
The STK-2 fast track exit — how long does it actually take in practice?
Checking my DIN status right now. Thanks for the wake-up call.