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    Question

    Under Section 164(2) of the Companies Act, 2013, a

    person who is or has been a director of a company shall not be eligible to be re-appointed as a director of that company or appointed in other companies for a period of five years, if the company in which they are a director has:
    A Failed to pay declared dividends for one year. Correct Answer Incorrect Answer
    B Failed to file financial statements or annual returns for any continuous period of three financial years. Correct Answer Incorrect Answer
    C Failed to repay deposits accepted by it or pay interest thereon for six months. Correct Answer Incorrect Answer
    D Incurred a loss for three consecutive financial years. Correct Answer Incorrect Answer
    E Both B and C are correct triggers for disqualification. Correct Answer Incorrect Answer

    Solution

    This provision is governed by Section 164 of the Companies Act, 2013 , which deals with the "Disqualifications for Appointment of Director." 1. The Statutory Triggers (Section 164(2)) A person is disqualified from being re-appointed in the same company or appointed in any other company for 5 years if the company in which they are a director:

    • (Clause a): Has not filed financial statements or annual returns for any continuous period of three financial years ; OR
    • (Clause b): Has failed to:
      1. Repay the deposits accepted by it or pay interest thereon;
      2. Redeem any debentures on the due date or pay interest due thereon; or
      3. Pay any dividend declared and such failure to pay or redeem continues for one year or more .

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