Chapter XI - Appointment and Qualifications of Directors
Section 164
Section 164: disqualifications for appointment of director
A person cannot be appointed as a director if any ground in subsection (1) applies. Directors of companies with specified filing or repayment defaults also face a five-year bar.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
Introduction
Subsection (1) lists personal grounds. They include being of unsound mind as declared by a court, insolvency, certain convictions, disqualification orders and unpaid calls. They also include conviction for a section 188 offence in the last five years and non-compliance with section 152(3). Since the Companies (Amendment) Act, 2019, exceeding the directorship limit in section 165(1) is also a ground.
Subsection (2) bars a person who is or was a director of a company that has not filed financial statements or annual returns for three continuous financial years. It also covers a company that has failed for a year or more to repay deposits, redeem debentures, or pay interest or a declared dividend. The person cannot be re-appointed in that company or appointed in another company for five years from the date of the failure.
Key takeaways
Personal grounds
Clauses (a) to (i) of subsection (1) apply to the individual, regardless of the company.
Company-default bar
A filing or repayment default by a company bars its directors for five years, subject to a six-month window for newly appointed directors.
Appeals
Disqualifications under clauses (d), (e) and (g) continue to apply even if an appeal or petition has been filed.
Screen personal grounds before appointment
Check each clause of subsection (1). A conviction with a sentence of at least six months makes the person ineligible until five years have passed since the sentence expired. A person sentenced to imprisonment for seven years or more is not eligible to be appointed as a director in any company. A court or Tribunal disqualification order disqualifies the person while it is in force. Calls unpaid for six months after the last day fixed for payment also disqualify.
Clause (i), on non-compliance with section 165(1), was inserted by section 26 of the Companies (Amendment) Act, 2019. That Act is deemed to have come into force on 2 November 2018, except for provisions it lists separately.
- India Code — consolidated Companies Act, 2013, section 164
- eGazette — Companies (Amendment) Act, 2019 (No. 22 of 2019)
- eGazette — Companies (Amendment) Act, 2017 (No. 1 of 2018)
- eGazette — MCA notification S.O. 1833(E), 7 May 2018 (commencement of Act 1 of 2018 provisions)
- eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
Check the company-default bar
For every company in which the proposed director is or was a director, check two things. First, whether financial statements or annual returns are outstanding for three continuous financial years. Second, whether any deposit, debenture, interest or dividend payment has been in default for one year or more. If so, the person cannot be re-appointed in that company or appointed in any other company for five years from the date of the failure.
A proviso inserted by section 52 of the Companies (Amendment) Act, 2017, with effect from 7 May 2018, applies to a person appointed to a company that is already in default under clause (a) or (b). That person does not incur the disqualification for six months from appointment. Under section 167(1)(a), a director disqualified under section 164(2) vacates office in all companies other than the company in default.
Apply the appeal rule and private-company additions
Since 7 May 2018, the substituted proviso to subsection (3) provides that the disqualifications in clauses (d), (e) and (g) of subsection (1) continue to apply even if an appeal or petition has been filed against the conviction or disqualification order.
A private company may set out further disqualifications in its articles, in addition to those in subsections (1) and (2).
Check class-specific exemptions
The MCA e-book for the Act lists an exemption notification under this section for Government companies. Read the current notification before applying the general rule to those companies.
Practical preparation
Obtain the proposed director's declaration; check each ground in subsection (1); list every current and past directorship and check those companies for filing and repayment defaults; note the six-month window for appointment to a company already in default; check the articles of a private company for extra disqualifications.
Practical checklist
Do
- Check the filing and repayment record of every company the candidate has served as a director.
- Use the six-month window to address an existing default where the proviso applies.
Avoid
- Do not treat a pending appeal as lifting a disqualification under clause (d), (e) or (g).
- Do not overlook additional disqualifications in a private company's articles.
Illustrative example
Hypothetical: joining a company with overdue filings
An individual is invited to join the board of a company that has not filed annual returns for three continuous financial years.
Identify
Confirm that the company is in default under section 164(2)(a).
Apply the proviso
Note that the new director does not incur the disqualification for six months from appointment.
Plan
Treat the six months as a deferral only and plan how the default will be addressed.
Outcome
- The proviso defers the disqualification for six months from appointment. It does not remove the company's default.
Glossary
- Undischarged insolvent
- A person adjudged insolvent who has not been discharged; clause (b) makes them ineligible.
- Company-default bar
- The five-year ineligibility in section 164(2) linked to a company's filing or repayment failures.
Frequently asked questions
Does filing an appeal lift a conviction-based disqualification?
No. Since 7 May 2018, disqualifications under clauses (d), (e) and (g) continue to apply even if an appeal or petition has been filed.
Can a director of a defaulting company join another board?
Not for five years from the date of the failure, under section 164(2). A person newly appointed to a company that is already in default does not incur the disqualification for six months from appointment.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026