Few regulatory actions carry as much professional weight as being disqualified from serving as a company director. For defaulting directors, inactive company promoters, and compliance heads dealing with ROC notices, director disqualification 164 isn't just a legal provision. It's a direct threat to your ability to participate in India's corporate ecosystem.
Section 164 of the Companies Act, 2013 sets out the circumstances under which an individual becomes ineligible to hold or be appointed to a directorship. The provision operates on two distinct tracks: personal defaults of the individual and collective defaults of the company. Understanding both is critical because the consequences are severe, the disqualification period is lengthy, and the path to restoration demands careful compliance work. This guide explains the section 164 Companies Act disqualification framework from the ground up, so you know exactly where you stand and what steps to take.
What Is Section 164 of the Companies Act, 2013?
Section 164 is the gatekeeper provision that determines who can and who cannot serve as a director in an Indian company. It was introduced as part of the Companies Act, 2013 to strengthen corporate governance and hold directors personally accountable for compliance failures. The provision replaced the older, less stringent Section 274 of the Companies Act, 1956.
The section operates through two sub-sections. Section 164(1) deals with personal disqualifications, situations where the individual director's own conduct or legal status renders them unfit. Section 164(2) addresses corporate-level defaults, where the company's failure to meet its statutory obligations triggers disqualification for all directors on its board. Both sub-sections carry serious implications for your Director Identification Number (DIN), your capacity to hold directorships, and your professional reputation. Keeping your Director KYC current is the first line of defence, since a deactivated DIN compounds the difficulties if disqualification proceedings arise.
Grounds for Disqualification: Section 164(1) vs 164(2)
Section 164(1): Personal Grounds
This sub-section targets the individual director. You become disqualified if you fall into any of the following categories.
Unsound mind: A court of competent jurisdiction has declared you to be of unsound mind, and that order remains in force.
Undischarged insolvent: You have been adjudicated as an insolvent and have not obtained your discharge.
Application for insolvency pending: An application for adjudication as an insolvent is pending against you.
Conviction by a court: You have been convicted of an offence (whether involving moral turpitude or otherwise) and sentenced to imprisonment for six months or more. The disqualification lasts for five years from the date of expiry of the sentence.
Court or Tribunal order: A court or tribunal has issued an order disqualifying you from being appointed as a director.
Non-payment of calls: You have not paid any calls on shares held by you within six months from the last day fixed for payment, whether alone or jointly with others.
Conviction under related party provisions: You have been convicted under Section 188 (related party transactions) at any time during the preceding five years.
Section 164(2): Corporate-Level Defaults
This is the sub-section that catches many directors by surprise. Under Section 164(2), you face disqualification if the company on whose board you serve has defaulted in any of these areas.
Non-filing of financial statements or annual returns: If the company has failed to file its financial statements (Form AOC-4) or annual returns (Form MGT-7) for any continuous period of three financial years, every person who was a director during the default period becomes disqualified.
Failure to repay deposits, interest, or dividends: If the company has failed to repay deposits or interest thereon on the due date, or to redeem debentures on the due date, or to pay declared dividends for a period of one year or more, the directors at the time of such failure face disqualification.
The critical point here is that Section 164(2) operates collectively. It doesn't distinguish between executive and non-executive directors, or between those who caused the default and those who merely happened to be on the board. This is precisely why proactive annual compliance for private limited companies is not merely advisable. It's a shield against personal disqualification.
Comparison Table: Section 164(1) vs Section 164(2)
The following table draws a clear distinction between the two grounds for disqualification, helping you identify which provision applies to your situation.
| Parameter | Section 164(1) | Section 164(2) |
| Trigger | Personal defaults of the individual (conviction, insolvency, court order, etc.) | Company-level defaults (non-filing of annual returns or financial statements for 3 continuous years, or failure to repay deposits/interest/dividends for 1+ year) |
| Who Is Affected | Only the individual director involved | All directors on the board of the defaulting company at the time of the default |
| Nature of Default | Individual misconduct or personal legal disqualification | Corporate non-compliance attributed collectively to the board |
| Duration of Disqualification | Varies by ground (e.g., 5 years from date of conviction, during insolvency, etc.) | 5 years from the date the defaulting company's name is struck off |
| Can the Director Resign to Escape? | Not applicable (disqualification is personal) | No. Directors who were on the board during the default period remain disqualified even if they resigned before the order |
| Reappointment Eligibility | After the disqualification period ends and the personal default is resolved | After 5 years from the date the company is struck off, provided no other disqualification applies |
| Impact on Other Directorships | Disqualified from being appointed in any company | Disqualified from being appointed or reappointed in any company during the 5-year period |
| Remedy Available | Resolve the personal default and wait for the prescribed period to lapse | File pending returns, settle dues, or apply to NCLT for relief under Section 252 |
Consequences of Director Disqualification
The fallout from director disqualification 164 extends well beyond a regulatory inconvenience. Here's what happens once the MCA flags your DIN.
Vacating Existing Directorships
A disqualified individual must vacate their directorship in all companies where they hold office, not just the defaulting company. This means a single corporate default in one entity can strip you of directorial positions across your entire portfolio of companies. For entrepreneurs holding seats on multiple boards, this domino effect can be devastating.
Inability to Accept New Appointments
During the disqualification period, you cannot be appointed or reappointed as a director in any company registered under the Companies Act. This includes private limited companies, public companies, Section 8 organisations, and one person companies. Even the appointment of a new director to replace you requires the company to follow a formal process and update the ROC.
DIN Deactivation
The MCA deactivates the DIN of disqualified directors. A deactivated DIN prevents you from filing any electronic forms with the Registrar, signing resolutions digitally, or being named in any compliance filing. Your digital identity as a director effectively ceases to function.
Reputational and Financial Impact
Disqualification is a matter of public record. Anyone conducting due diligence, whether investors, lenders, partners, or prospective employers, can check your DIN status on the MCA portal. The reputational damage is often harder to repair than the legal disqualification itself. Additionally, banks and financial institutions may reassess lending relationships with companies where directors face disqualification.
How to Check Your DIN Disqualification Status
The MCA makes it straightforward to verify whether your DIN has been flagged or deactivated. Visit the MCA portal (mca.gov.in), navigate to the "MCA Services" tab, and select "Check Director DIN Status" under the DIN-related services. Enter your DIN, and the system will display your current status: Approved, Deactivated, or Disqualified.
If your status shows "Deactivated due to Non-filing of DIR-3 KYC," the issue is a KYC compliance lapse rather than Section 164 disqualification. However, if the status reflects disqualification under Section 164(2), it confirms that the company you were associated with defaulted on its filing obligations. Either way, immediate professional attention is warranted.
Steps to Remove Disqualification and Restore DIN
Disqualification is not necessarily permanent. The law provides a structured pathway for remediation, though it demands diligence and patience. The following table outlines the sequential steps involved.
| Step | Action | Details |
| 1 | Identify the Ground | Confirm whether disqualification is under Section 164(1) or 164(2) and identify the specific default |
| 2 | Rectify Pending Compliance | File overdue annual returns (AOC-4, MGT-7), financial statements, and clear outstanding deposits, interest, or dividend dues |
| 3 | File DIR-3 KYC | Ensure Director KYC is current. A deactivated DIN complicates the restoration process significantly |
| 4 | Apply to NCLT (if company struck off) | File an application under Section 252 of the Companies Act to restore the struck-off company to the Register of Companies |
| 5 | Obtain NCLT Order | The Tribunal may order restoration if satisfied that the company was carrying on business or that restoration is just |
| 6 | File NCLT Order with ROC | Submit the certified copy of the NCLT order to the Registrar within 30 days for updating the records |
| 7 | Reactivate DIN | Once the company is restored and defaults rectified, apply for DIN reactivation through MCA portal |
| 8 | Monitor Future Compliance | Engage professional compliance support to prevent recurrence of defaults that could trigger fresh disqualification |
For directors whose disqualification stems from the company being struck off the Register, restoration through NCLT is the primary route. Engaging experienced professionals for secretarial retainership services ensures that the NCLT application is prepared correctly, deadlines are met, and post-restoration compliance is maintained without further lapses.
If the default was limited to non-filing of annual returns or financial statements, the first and most urgent step is to clear the backlog. File the overdue AOC-4 (financial statements) and MGT-7 (annual return) forms for all missing years. Simultaneously, ensure your Director KYC filing is up to date, as a deactivated DIN will block the submission of pending compliance forms.
Conclusion
Director disqualification 164 is one of the most consequential provisions in Indian corporate law. It doesn't just penalise the company. It directly targets the individuals responsible for governance, stripping them of their authority to serve on any board. The provision is designed to enforce accountability, and the MCA has demonstrated its willingness to apply it broadly, particularly against directors of inactive and non-compliant companies.
Whether you are dealing with a fresh ROC notice, an inactive company you forgot to close, or a DIN that has been deactivated without warning, the path forward starts with understanding your position under section 164 Companies Act disqualification rules. Identify the ground, rectify the default, file the necessary forms, and seek NCLT relief if the company has been struck off.
At Patron Accounting, we assist defaulting directors, compliance heads, and business owners in navigating the disqualification and restoration process from start to finish. From filing pending annual returns and Director KYC to preparing NCLT applications and re-establishing full compliance, our team of chartered accountants and company secretaries ensures that your directorial standing is restored as efficiently as the law permits. Get in touch today to resolve your disqualification and protect your professional future.
