How to appoint a new Director in an active company with all Directors are disqualified?

While there are confusion prevailing over What next after disqualification of Directors? MCA is yet to come out with any official clarification on it. There are many companies which are affected due to the steps taken by MCA. While, the action by MCA was very clear that all the Directors who are disqualified will not be able to work as a Director and their respective DIN will be disabled for a period of 5 years. Many senior professionals have opined that such disqualification will not amount to automatic vacation of office of directorship from other companies. 

While we await further clarification from MCA on its stand on disqualification of Directors under Section 164 and disability of DIN. The notice at ROC office makes one thing clear, an Active Company (the one that is not struck off by ROC), can appoint new Director on their Board from Back end.

While generally appointing a Director in active company is simple and can be given effect by filing eForm DIR-12 in general case. Recently, MCA struck off nearly 2.24 lakh companies for remaining inactive for a period of two (2) years or more and around 3.09 lakh Directors disqualified who were on the Board of Companies that have failed to file Financial Statements and/or Annual Returns for a continuous period of three (3) financial years during 2013-14 to 2015-16.

Few active companies, which has done its filing on time and are not struck off by MCA but left with no active Directors have started facing an issue of running the Company and are unable to file any documents with ROC. To solve the issue, MCA has come out with temporary solution of Back-end (or of-line) filing of Forms along with relevant documents.

To appoint a Director, the Company will need to submit, a request letter under Section 167(3) of the Companies Act, 2013 signed by Shareholder/s of the Company explaining the facts that all the Directors of the Company are disqualified and requesting for insertion of atleast one Director through back end of the e-portal.

Note: If shareholder is also a disqualified director, then shareholder should sign in the capacity of Shareholder only and not as a Director.

The above mentioned, letter should be submitted with following mandatory attachment:

1.              Appointment of the new Directors under section 167(3) of the Companies Act, 2013 by the Promoters/Shareholders.

2.                 NOC from all disqualified directors from the company for appointment of new Director/s

3.                 Digitally filled in DIR-12 by the professional for the new Director along with requisite fees and additional fees, if any, paid through miscellaneous challan (under individual category) along with following documents

a.      DIR - 2 Consent letter of New Director.

b.      Address and ID Proof of New Director.

c.      MBP-1 Notice of interest by the Director.

d.       DIR-8 limitation of Director are as per section 164(2) Rule 4 of Companies (Appointment and Qualification of Directors) Rules, 2014.

e.      DIN status of the New Director – Print out

f.       Print out of Names and CIN of the Company where new Director is already a director

4.                 Proof of shareholding of the Promoters/shareholders (who appoints the new director) like share certificates or register of members updated till the date of the request letter along with certification by professional with membership number etc.,

5.                 A Certificate from professional, stating that he/she has verified the register of members and other connected records and certify that the applicant/s is/are the majority shareholder/s.

6.                 Copy of resolution for appointment of the new Directors along with the copy of notice and explanatory statement. 

Note: In new process, Affidavit from Appointee Director is not required anymore. However, in case if same is already availed by the Company, it is advisable to submit it with the above mentioned documents.

The above documents to be submitted in hard copy along with soft copy in pen drive only. Mumbai ROC has expressly clarified that the soft copies must be submitted in Pen Drive only and DVD or CD will not be accepted.

Note: This circular applicable only for active Companies where all Directors are disqualified under section 164(2)(a) of the Companies Act, 2013.