Complete Procedure of Removal of Directors Disqualification and Activation of DIN By FCS Shweta Gupta

What is ROC?

Registrars of Companies (ROC) appointed under Section 609 of the Companies act covering the various states and Union Territories are vested with the primary duty of registering companies and LLP’s floated on the respective states and the Union Territories and ensuring that such companies and LLPs comply with statutory requirements under the ACT. The Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA), which is the body that deals with the administration of companies and a Limited Liability Partnership in India. The Registrar of companies also certifies that Limited Liability Partnerships comply with the legal requirements contained in the Limited Liability Partnership Act, 2008.

ROC can refuse to register commonly on various grounds. The Memorandum of Association (MOA) is filled with the registrar comprises of five clauses namely,

  • Name clause.

  • Object clause.

  • Registered office clause.

  • Capital clause.

  • Liability clause 

The registrar needs to ensure that no registration is allowed for companies to have an objectionable name. The registrar could also decline to register any company which has unlawful objectives.

Main functions of the Registrar of Companies (ROC) –

  • Registration of a company and Incorporation of the company is carried by ROC in India.

  • It completes the regulation and reporting of corporations and their shareholders and directors. It also administers the government reporting of several matters which includes the annual filing of numerous documents.

  • Every company in the country requires the approval of the Registrar of companies to come into validity. It provides an incorporation certificate which is the conclusive evidence of the existence of any company.

  • A company once incorporated cannot cease unless the company is struck off from the register of companies.

  • The Registrar of companies plays an essential role in fostering and stimulating business culture.

  • It is worth noting that the Registrar of companies could also ask for supplementary information from any company.  

  • Honorably, the Registrar of companies could also file a petition for winding up a company.

As per the provisions contained in section 117 of the companies Act, 2013, every resolution is required to be filed with the ROC within 30days of being passed. The registrar of companies needs to record such resolutions. The companies act, 2013, has also laid down the penalty in case of failure to file the resolutions with the registrar within the stipulated time. In other words, a company is required to initiate the Registrar of Companies worrying all of its activities which includes appointing directors or managing directors, issuing a prospectus, appointing sole selling agents, or the resolution regarding voluntary winding up, etc.

No companies can come into existence on its own. It requires a certificate of incorporation issued by the Registrar of Companies after the finalization of several statutory requirements. As part of the statutory process, the promoters need to submit several documents to the Registrar of Companies. These documents include the Memorandum of Association (MOA), Article of Association (AOA), the pre-incorporation agreement for appointing directors/ managing directors, and the declaration by an authorized person confirming that requirements relating to registration have been adhered to. After authenticating the documents, the Registrar of Companies inputs the name of the company in the register of companies and releases the certificate of incorporation. The registry together with the certificate of incorporation also issues a certificate of commencement of business. A public limited company is required to get this certificate before commencing business.

What is the procedure of filing an annual return by ROC?

  1. Hold a Board meeting to, authorize the auditor for the rehearsal of financial statements as per Schedule III of the Companies Act of 2013. Authorize the Director or company secretary for preparation of board report and annual return as per the Companies Act, 2013.

  2. Hold another Board Meeting for approving the draft financial statements, Board Report, and Annual Return by the directors of the company.

  3. Conduct the Annual General Meeting of the Company and pass the necessary resolutions. Please note that the financial statements are considered final only when the same is approved by the shareholders at the General Meeting.

Director Disqualification-

In accordance with section 164(2)(a) of the Companies Act 2103, any person who is or has been a director of a company that has not filed financial statements or annual returns for any continuous period of three financial years, then he shall be ineligible for reappointment as a director of that company or appointed in another company for five years from the date on which the told company fails to so. There are other reasons as well through which a particular person can be disqualified to be a Director, particularly the directors are disqualified under this provision only and in more layman language. A person shall be disqualified to be a Director for five years if the company in which he is or was a director has not filed financial statements.

Remedies to withstand disqualification of a director–

Appeal with NCLT under section 252 for restoration for struck off companies: 

  • File a petition under section 252 of the companies act 2013.

  • Application to companies whose name got struck off in disqualification.

  • Appeal to be made before the National Company Law Tribunal(NCLT) to recover the name of the company with the Registrar of companies(ROC).

Appeal with the High Court by filing a Writ Petition for Disqualified Directors:

  • Article 226 of the Indian Constitution provides that such disqualified directors can file a writ petition in the concerned High Courts to seek relief.

  • This solution has been explored since 2017 by many of the disqualified directors in High courts and the judgments have given a new lease of life to a Director's career.

After the regulatory bodies of NCLT and Honorable High court passes the orders for the revival of struck off company and DIN reactivation. The appellant requires the filing of Statutory documents with ROC for the restoration of disqualified DIN. Also, file the annual returns of the last three years with Income-Tax Authority. Several directors of the Companies approached the High court/National company law tribunal in order to revive their DIN's and companies under article 226 of the companies act, 2013.

Over the last few years, the Ministry of Corporate Affairs(MCA) has actively taken action against shell companies. They have disqualified over 3,00,000 directors under section 164(2)(2) of the Companies Act 2013. How to overcome these procedures for disqualification. Firstly, why does the disqualification of directors happen? As per law, the disqualification of directors happens if the director fails to file the financial statements or annual returns for three financial years sequentially. In addition to this, if he has not reimbursed the stakes or interest or redeemed debentures, then he is said to be disqualified.

Activation of Director Identification Number (DIN)

Following is the detailed procedure for DIN activation–

Step 1 – Disqualified directors have to file a writ petition under Article 226 of the constitution of India before the high court. The writ petition should accompany Urgent Application, Notice of motion, Memo of parties, Synopsis and list of date and events, Circumstances which lead to non-compliance of filing of statutory documents, the status of company and directors seeking improvement, copy of the press release notice issued by ROC listing disqualified directors, List of all companies in which the appellant is director, stay application under section 151 of CPC, prayer clause for setting aside the publication issued by ROC.

Step 2 – The company can further file an appeal under section 252if companies act, 2013 before the NCLT for restoring the company name.

Step 3 – When the high court and NCLT give an order on DIN reactivation and revival, the appellant has to file documents along with annual returns with ROC.

Step 4 – As mentioned above, after the completion of compliance, the ROC will raise a ticket on MCA21 and upload a copy of the order. Lastly, after pro0er verification, the officials will reactivate the DIN.

Conclusion: Numerous directors of the Companies approached the High Court/National Company Law Tribunal (“NCLT”) to revive their DIN's and Companies under Article 226 of the Constitution of India and under section 252 of Companies Act, 2013.

Lex comply

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