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{“@context”:”https://schema.org”,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”What are the grounds for director disqualification under Section 164?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Section 164(1) disqualifies a person from being appointed as director if: (a) they are of unsound mind declared by a court; (b) they are an undischarged insolvent; (c) they have been convicted of an offence involving moral turpitude and sentenced to imprisonment for 6 months or more, within 5 years of such conviction; (d) a court or tribunal has passed an order disqualifying them; (e) they have not paid calls in respect of shares held in any company and 6 months have elapsed; (f) they have been convicted of an offence under Sections 188, 188A, or 188B. Section 164(2) additionally disqualifies directors of companies that fail to file financial statements or annual returns for 3 consecutive years.”}},{“@type”:”Question”,”name”:”What is Section 164(2) disqualification for non-filing of ROC returns?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Section 164(2) provides that a director is disqualified from being re-appointed in the same company, or appointed in any other company, for 5 years if the company fails to file its financial statements (AOC-4) or Annual Return (MGT-7) for 3 consecutive financial years. The disqualification is automatic — no court or tribunal order is needed. The MCA updates the DIN status to ‘Disqualified’ when the company is tagged as defaulting for 3 consecutive years.”}},{“@type”:”Question”,”name”:”How long does a Section 164(2) disqualification last?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Five years from the date of disqualification. A director disqualified in, say, 2024 (when the company’s third consecutive year of non-filing is identified) remains disqualified until 2029. During this period, they cannot be appointed as a director in any company in India. Once the 5 years expire, the disqualification is automatically lifted and the DIN becomes active again.”}},{“@type”:”Question”,”name”:”Can a disqualified director get their DIN reactivated before 5 years?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”A Section 164(2) disqualification arising from ROC non-filing cannot be lifted before 5 years by simply filing the overdue returns. Even if the company files its overdue AOC-4 and MGT-7 returns, the disqualification remains until the 5-year period expires. The director must wait out the disqualification period. However, directors have successfully challenged Section 164(2) disqualifications in courts on procedural grounds (lack of opportunity to be heard), so legal recourse is possible in some cases.”}},{“@type”:”Question”,”name”:”What happens to the company if its directors are all disqualified?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”If all directors of a company are disqualified, the company cannot function legally — it cannot sign documents, file forms, open bank accounts, or make business decisions. In such cases, the Central Government has power under Section 167(4) to appoint directors to manage the affairs of the company temporarily. The company is also at high risk of strike-off under Section 248 if it has not filed returns and its directors are disqualified.”}}]}
Director Disqualification Under Section 164: Grounds, Duration and How to Remove Disqualification
Section 164 of the Companies Act 2013 creates two types of director disqualification: one based on personal conduct (subsection 1), and one based on the company’s compliance failures (subsection 2). The second type is the one that catches most founders and directors by surprise: if a company fails to file its financial statements or annual return for three consecutive financial years, every director of that company is automatically disqualified for five years. They cannot be reappointed in the same company or appointed in any other company anywhere in India.
This guide explains both disqualification triggers, what disqualification means in practice, how the MCA enforces it, and whether a disqualified director has any options.
Key Takeaways
- Section 164(1): disqualification based on personal conduct (conviction, insolvency, etc.)
- Section 164(2): automatic disqualification when a company fails to file AOC-4 or MGT-7 for 3 consecutive years
- Duration: 5 years from the date of disqualification; cannot be reduced by filing overdue returns
- Effect: the DIN is marked ‘Disqualified’; the director cannot sign any MCA form or be appointed in any company
- Directors must vacate office within 30 days of becoming disqualified under Section 167
- Companies must file annual returns every year to prevent this; there is no cure once 3 years pass
Contents
Section 164(1): personal conduct grounds
A person cannot be appointed as a director of a company if any of the following apply:
| Ground | Detail |
|---|---|
| Unsound mind | Person declared to be of unsound mind by a competent court |
| Undischarged insolvent | Person is an undischarged insolvent (personal insolvency proceedings pending) |
| Criminal conviction | Convicted of an offence involving moral turpitude or otherwise and sentenced to imprisonment for 6 months or more, within 5 years of conviction |
| Court/Tribunal order | A court or Tribunal has passed an order disqualifying them from appointment as director |
| Unpaid calls | Has not paid any calls in respect of shares of any company held by them and 6 months have elapsed from the last day fixed for payment |
| Minor | A person below the age of 18 years cannot be a director |
| RPT violation conviction | Convicted of an offence under Section 188 (related party transactions) or prescribed sections within the preceding 5 years |
Section 164(2): non-filing disqualification
Section 164(2) is the most operationally significant disqualification for directors of Private Limited Companies. It provides:
A director shall not be eligible for re-appointment as a director of that company, or appointed in any other company for a period of 5 years from the date on which such default was made, if the company of which they are a director has:
- Failed to file the financial statements (Form AOC-4) for any 3 consecutive financial years, OR
- Failed to file the Annual Return (Form MGT-7 / MGT-7A) for any 3 consecutive financial years
This disqualification is automatic: no notice, no court order, no hearing is required. When the MCA database identifies that a company has not filed for three consecutive years, it tags the company as defaulting and updates all associated DINs to ‘Disqualified’ status. The director may discover the disqualification only when they try to sign an MCA form and the system rejects the DSC.
Effect of disqualification: what a director cannot do
Once a director’s DIN is marked ‘Disqualified’ under Section 164(2), the following consequences flow:
- Cannot sign any MCA e-form using their DSC (the MCA system validates DIN status at submission)
- Cannot be appointed as a director, managing director, or whole-time director in any company in India
- Cannot be re-appointed in the same company whose defaults caused the disqualification
- Cannot act as a director or sign board resolutions that require director authorisation
- Any appointment as director made after the disqualification date is void
The disqualification also carries forward to LLPs: a disqualified person cannot be designated as a Designated Partner of an LLP during the disqualification period, since LLP regulations cross-reference the Companies Act disqualification provisions.
Section 167: when the director must vacate office
Section 167(1) requires a director to vacate their office if they incur any disqualification under Section 164. The director must vacate within 30 days of the disqualification event. If the director does not voluntarily vacate, the company must remove them. Continuing to act as a director after the 30-day period makes the director liable for a penalty of Rs. 1,00,000 and the company liable under Section 167(2).
The company must then appoint a new director within 6 months to fill the casual vacancy.
Options for a disqualified director
- Wait out the 5 years: The disqualification expires automatically after 5 years from the date it took effect. After that, the DIN becomes active again without any application.
- Challenge in High Court: Directors have successfully petitioned High Courts against Section 164(2) disqualifications on the ground of violation of natural justice (no prior notice or opportunity to be heard was given before disqualification). High Courts in Delhi, Bombay, and other states have granted stays and quashed disqualifications in several cases.
- File overdue returns (partial benefit): Filing the overdue AOC-4 and MGT-7 does not remove the disqualification, but it prevents further default from extending the clock. It also helps the company avoid strike-off, preserving the legal entity.
- Resignation and new company: During the disqualification period, a disqualified director can work in a company as an employee or consultant (non-director role) since the disqualification applies only to directorial appointment.
How to prevent Section 164(2) disqualification
Prevention is straightforward: file AOC-4, MGT-7, and all other annual compliance forms every year by the due dates. The section requires three consecutive years of default before disqualification triggers. Even one late but eventual filing breaks the consecutive chain.
For directors appointed in multiple companies: the disqualification from any one company’s default applies across all companies. A director who serves on 10 boards and one of those companies defaults for 3 years has their DIN disqualified, affecting their directorship in all 10 companies.
Prevent Director Disqualification
Tradeviser manages annual ROC compliance for Private Limited Companies to ensure AOC-4 and MGT-7 are filed on time every year, preventing Section 164(2) disqualification for all directors.
Frequently Asked Questions
CA Madhusmita Padal is a Practicing Chartered Accountant with firms based in Odisha and Chennai. She specializes in taxation, company law, and auditing. She is passionate about simplifying complex concepts and making knowledge accessible to all.