Section 164 deals with disqualification norms related to company directors.
In another round of action against errant companies and directors, the Ministry of Corporate Affairs (MCA) has directed the Registrar of Companies (RoC) to identify directors who have not filed financial returns and annual statements for three consecutive financial years.
A senior government official said the RoC has been directed to identify and flag directors disqualified under Section 164(2)(a) of Companies Act, 2013 for non-filing of financial statements or annual return for a continuous period of three financial years – from FY16 to FY18. Section 164 deals with disqualification norms related to company directors.
“All the defaulting directors are being cautioned to find the pending statutory returns and do the necessary compliance, or else strict action shall be taken against them including imposing penalties. The DINs of such directors are not allowed to be used for filling any e-forms on MCA21 portal,” the official said.
Gaurav Mohan, chief executive officer at accounting firm AMRG & Associates, said the government is gradually and progressively moving the non-complaint corporate players out of the value chain, strengthening the backbone of business community and enhancing investor confidence in the Indian corporate framework, eyeing inflow of investment in long term.
“MCA is in the corporate clean-up phase wherein corporate delinquency has been dealt with extreme finesse and without any political intervention. In recent past, numerous shell companies have been closed for good, penalties were imposed on non-filers, SFIO completed the investigations in 17 ‘chit fund companies’, action taken against illegal NBFC’s and now the sword is on directors of non-complaint corporate entities,” he explained.
Sandeep Jhunjhunwala, director of Nangia Andersen LLP, said the MCA has cautioned directors to complete required statutory compliances or face the wrath of the law.
“This is definitely aimed at instilling a culture of compliance, increasing investors’ confidence and most significantly tightening the noose on defaulting directors. Rulings from various high courts against a spate of writ petitions filed earlier had made clear that Sec 164(2)(a) disqualification would apply for disqualifying directors of the company, if it fails to file annual returns for three financial years, beginning April 1, 2014,” he added.