Identification/flagging of directors disqualified
The Ministry of Corporate Affairs (MCA) had informed on the matter that the Registrars of Companies (ROCs) are in process of identification as well as flagging of directors disqualified under section 164(2)(a) of Companies Act, 2013 relating to their default of non-filing of financial statement or annual return for continuous period of three fiscal year, that is 2015-16, 2016-17 and 2017-18.
Regarding this all the defaulting directors were cautioned in order to find the pending statutory returns as well as do needed compliance in accordance with provisions of law, otherwise, action shall be initiated under Section 164 of the Companies Act, 2013 and Rules made thereunder.
It was also specified that the DINs of such directors are not permitted to be utilized for filing any e-forms on MCA21 portal.
What is a financial statement?
Financial statements are basically the reports prepared by a corporation's management to present the fiscal performance as well as a position at a point in time. A set of financial statements includes a balance sheet, income statements, statement of owner's equity, as well as statement of cash flows.
What is the annual return?
The annual return is a document that corporations had towards filing at Companies House every year on the anniversary of the company's incorporation. It includes details of the corporation's directors, shareholders as well as registered office address.
What is the Director Identification Number (DIN)?
DIN is basically a unique Director Identification number which is allotted by the Central Government to any individual aiming to be a Director or an existing director of a corporation. Director Identification Number (DIN) was introduced in India by way of the Companies Amendment Act, 2006.
Section 164 of the Companies Act 2013 states the provisions for the disqualifications for appointment of director. In accordance with Companies Act, 2013, Section 164 is applicable in the direction of disqualification for appointment of director. As per sub-section 164(2) (a), an individual who has been a director with a corporation that has not filed financial statements or annual returns for 3 consecutive financial years shall face disqualification.
The applicable extract of the provision under the above-mentioned sections are as follows:
Section 164 (2) states that no individual who is or has been a director of a corporation which (a) has not filed financial statements or annual returns for any continuous period of 3 fiscal years shall be eligible towards being re-appointed as a director of that corporation or appointed in other corporation for a period of 5 years from the date on which the said corporation fails to do so.
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