Section 167 of the Companies Act, 2013
Section 167 of the Companies Act, 2013 deals with the disqualification of directors — specifically, the vacation of office by a director when certain conditions are met.
🔹 Section 167 – Vacation of Office of Director
Key Provisions:
A director shall vacate his office in the following cases:
✅ 1. Disqualifications (Clause a):
If he incurs any of the disqualifications specified under Section 164 (e.g., being of unsound mind, insolvent, convicted, etc.).
✅ 2. Absence from Board Meetings (Clause b):
If he absents himself from all the Board meetings held during a period of 12 months, with or without seeking leave of absence from the Board.
✅ 3. Contravention of Related Party Provisions (Clause c):
If he acts in contravention of Section 184 (which deals with disclosure of interest in contracts or arrangements), and such contravention is notified by the Board.
✅ 4. Disqualification due to Court or Tribunal Order (Clause d):
If he is disqualified by an order of a court or tribunal.
✅ 5. Imprisonment (Clause e):
If he is convicted and sentenced to imprisonment for not less than 6 months, the office is vacated even if an appeal is filed.
However, if sentenced to imprisonment for 7 years or more, he is permanently disqualified under Section 164(1)(d).
✅ 6. Removal under Companies Act or Law (Clause f):
If he is removed in accordance with the provisions of this Act.
✅ 7. Not Having DIN (Clause g):
If he fails to comply with Section 165 (regarding maximum number of directorships), or Section 164(2) (disqualification due to non-filing of financial statements or annual returns for 3 years, etc.).
🔸 Special Case – Director in Defaulting Company:
If a director is disqualified under Section 164(2) (e.g., a company hasn't filed financial statements or returns for 3 years), then:
He shall vacate office in all other companies except the defaulting company.
🔸 Penalty for Continuing as Director After Disqualification:
Continuing as a director despite disqualification can result in a penalty of ₹5 lakh, and if default continues, ₹500 per day (maximum up to ₹5 lakh for individuals).
📄 Purpose of Section 167:
To ensure that non-compliant, inactive, or legally unfit persons are removed from the directorship of companies to maintain integrity in corporate governance.
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