Qualifications and Disqualifications of Directors (Section 164)

The Companies Act, 2013 does not prescribe a positive list of formal educational or professional qualifications for an ordinary director — unlike, say, the mandatory ICSI membership required of a Company Secretary — because directors come from many different backgrounds and the choice of who is fit to direct a particular business is largely left to the shareholders who elect them (subject to the specific eligibility criteria fixed for independent directors under Section 149(6)). What the Act does prescribe, in considerable detail, is a list of disqualifications: circumstances in which a person is barred by law from being appointed, or from continuing, as a director, regardless of how suitable the shareholders might otherwise consider that person.

Section 164(1) sets out the disqualifications applicable at the point of appointment. A person is disqualified from being appointed a director if he is of unsound mind and stands so declared by a competent court; is an undischarged insolvent; has applied to be adjudicated an insolvent and the application is pending; has been convicted by a court of an offence involving moral turpitude or otherwise and sentenced to imprisonment of not less than six months, with the disqualification lasting for five years from the date of expiry of the sentence (a longer disqualification applies where the sentence is for seven years or more); has been convicted of an offence dealing with related-party transactions under Section 188 at any time during the preceding five years; has not obtained a Director Identification Number; or has failed to pay calls on shares held in the company for six months from the last date fixed for payment. A person disqualified under any of these grounds cannot validly be appointed a director of any company until the disqualification is removed or its period expires. …