Compliance · Provision
Who cannot be appointed a director, the five-year bar that follows three years of unfiled financial statements or annual returns, and the six months a new director gets. (Section 164, Companies Act, 2013.) In force since 1 April 2014 · The six-month proviso to sub-section (2) in force since 7 May 2018 · Text checked against India Code on 26 October 2026.
Quick Statutory Answer
Section 164 of the Companies Act, 2013 sets out who cannot be appointed a director. Sub-section (1) lists personal grounds: being declared of unsound mind, insolvency, a sentence of six months or more in the last five years (seven years or more bars for good), a court or Tribunal order, unpaid calls, a related-party conviction, having no DIN, and holding more directorships than section 165 allows. Sub-section (2) is the one that catches small companies: where a company has not filed its financial statements or annual returns for any continuous period of three financial years, no person who is or has been its director can be reappointed to it, or appointed to any other company, for five years. Under section 167(1)(a) that director's office falls vacant in every other company, though not in the one in default.
164. Disqualifications for appointment of director.— (1) A person shall not be eligible for appointment as a director of a company, if— (a) he is of unsound mind and stands so declared by a competent court; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is pending; (d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence: Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company; (e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force; (f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; (g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or (h) he has not complied with sub-section (3) of section 152. (i) he has not complied with the provisions of sub-section (1) of section 165. (2) No person who is or has been a director of a company which— (a) has not filed financial statements or annual returns for any continuous period of three financial years; or (b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so: Provided that where a person is appointed as a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment. (3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1) and (2). Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shall continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification.
| Ground | Disqualification | Provision |
|---|---|---|
| Company has not filed financial statements or annual returns for 3 continuous financial years | 5 years: no reappointment to that company, no appointment to any other | s.164(2)(a) |
| Company has defaulted for a year or more on deposits, debentures or a declared dividend | 5 years, as above | s.164(2)(b) |
| Newly appointed to a company already in default | 6 months from the appointment before the disqualification applies | Proviso to s.164(2) |
| Sentenced to 6 months or more for any offence | Until 5 years after the sentence ends | s.164(1)(d) |
| Sentenced to 7 years or more | Permanently, in every company | Proviso to s.164(1)(d) |
| Convicted under section 188 (related party transactions) | For 5 years after the conviction | s.164(1)(g) |
| Declared of unsound mind; insolvent, or an insolvency application pending; a court or Tribunal order in force | While the declaration, insolvency, application or order stands | s.164(1)(a), (b), (c), (e) |
| Calls on his shares unpaid 6 months after the last day for payment | While the calls remain unpaid | s.164(1)(f) |
| No Director Identification Number; more directorships than section 165(1) allows | Until the DIN is allotted or the directorships are within the limit | s.164(1)(h), (i) |
5-year bar on every director. No reappointment to the defaulting company and no appointment to any other for five years, and office vacated in every other company (ss.164(2), 167(1)(a)).
The section that lists who cannot be appointed a director. Sub-section (1) covers personal grounds such as insolvency, certain convictions, a court order and having no DIN; sub-section (2) disqualifies the directors of a company that has not filed its financial statements or annual returns for three continuous financial years, or has defaulted on deposits, debentures or dividends for a year.
Where a company has not filed its financial statements or annual returns for any continuous period of three financial years, or has failed for a year or more to repay deposits, redeem debentures, or pay interest on them or a declared dividend, no person who is or has been its director can be reappointed to that company or appointed to any other company for five years from the date of the failure.
Under section 164(2), five years from the date on which the company fails to file or pay. Under section 164(1)(d), five years from the end of a sentence of six months or more, and permanently for a sentence of seven years or more. The other grounds in sub-section (1) last as long as the condition does.
No. Under the proviso to section 167(1)(a), a section 164(2) disqualification vacates the director's office in every company other than the one in default, so the directors stay on that company's board, where the overdue filings can still be made.
Yes. The proviso to section 164(2), in force since 7 May 2018, says a person appointed to a company already in default of clause (a) or (b) does not incur the disqualification for six months from the date of his appointment.
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