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A person shall not be capable of being appointed director of a company, if,

*he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force

*he is an undischarged insolvent

*he has applied to be adjudicated as an insolvent and his application is pending

*he has been convicted by a Court of any offence involving moral turpitude 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

*he has not paid any call in respect of 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

*an order disqualifying him for appointment as director has been passed by a court and is in force unless the leave of the court has been obtained for his appointment in pursuance of that section.

The Central Government may, by notification in the Official Gazette, remove :-

the disqualification incurred by any person in virtue of clause (d) either generally or in relation to any company or companies specified in the notification; or

the disqualification incurred by any person in virtue of clause (e)

*A private company which is not a subsidiary of a public company may, by its articles, provide that a person shall be disqualified for appointment as a director on any grounds in addition to those specified above.

*No person to be a director of more than twenty companies

*No person shall, hold office at the same time as director in more than twenty companies.

*Where a person already holding the office of director in twenty companies is appointed, as a director of any other company, the appointment :-

*shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the companies in which he was already a director; and

*shall become void immediately on the expiry of the fifteen days if he has not, before such expiry effectively vacated his office as director in any of the other companies aforesaid.

Where a person already holding the office of director in nineteen companies or less is appointed, as a director of other companies, making the total number of his directorships more than twenty, he shall choose the directorships which he wishes to continue to hold or to accept so however that the total number of the directorships, old and new, held by him shall not exceed twenty.

None of the new appointments of director shall take effect until such choice, is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.

In calculating the number of companies of which a person may be a director, the following companies shall be excluded :-

a private company which is neither a subsidiary nor a holding company of a public company

an unlimited company

an association not carrying on business for profit or which prohibits the payment of dividend

a company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.

Any person who holds office, or acts, as a director of more than twenty companies in contravention of the foregoing provisions shall be punishable with fine which may extend to five thousand rupees in respect of each of those companies after the first twenty.

Vacation of office by directors

The office of a director shall become vacant if :-

*he fails to obtain within the time specified ( 2 months ) or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company

*he is found to be of unsound mind by a Court of competent jurisdiction

*he applies to be adjudicated an insolvent

*he is adjudged an insolvent

*he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect thereof to imprisonment for not less than six months

*he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, with in six months from the last date fixed for the payment of the call unless the Central Government has, by notification in the Official Gazette removed such disqualification.

*he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board, for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board

*he, whether by himself or by any person for his benefit or on his account or any firm in which he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295 ( without due authorization of the Central Government )

*he acts in contravention of section 299 ( failure to disclose interest in any transaction with the company )

*he becomes disqualified by an order of Court under section 203

*he is removed by the members by- resolution at a general meeting

*having been appointed a director by virtue of his holding any office or other employment in the company, he ceases to hold such office or other employment in the company.

The disqualification referred to in clauses (d). (e) and (j) shall not take effect,-

for thirty days from the date of the adjudication sentence or order

where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of

where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of.

If a person functions as a director, knowing that his office has vacated on account of the above provisions, shall be liable to a fine upto Rs. 500/- per day of default.

A private company which is not a subsidiary of a public company may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in above


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