Backend Appointment of Directors

The Registrar of Companies (ROC) of various states took an outrageous step and struck off many Companies who had not done their filing for a period of two financial years believing that such Companies are not doing any business in accordance with Section 248 (2) of the Companies Act, 2013 and consequently, disqualified their Directors pursuant to Section 164 (2) (a) of the Companies Act, 2013.

However, in most of the cases, the Companies were actively carrying on business but due to not filing eForm AOC-4 and MGT-7 with the ROC, the Company got struck off and the Directors of such Companies usually come to know about it when the bank account of Companies get seized by the bank authorities.

Now, in this respect, the major problem faced by the Directors whole over the nation can be summarized into two parts:

Situation 1: Even if the Directors are able to revive their Company from National Company Law Tribunal having respective jurisdiction, they shall not be able to file annual returns with the ROC as they do not have any ACTIVE director on board whose digital signature could be affixed to file the eForms.

Situation 2: These Directors usually holds directorship in other Companies and consequently of being disqualified in one particular Company, they are not able to file annual returns and financial statements of other common Companies as well in which they hold Directorship.

Now, removal of Director disqualification from the Hon’ble High Court of respective state under whose ROC the Director is disqualified can be the foremost and most convenient option, but under this, the Hon’ble High Courts are providing temporary reliefs by ordering for activation of Director Activation Numbers (DIN) till all matters are heard and no permanent relief is being provided by any High Court as of now.

Moreover, in some cities like Mumbai and Delhi, the High Courts are not even passing orders for activation of DIN. And then in this case, the Companies are left with the only option of backend appointment of Directors to complete the annual filing and keep the Company status “ACTIVE”.

Therefore, in this article, we shall study about the regulatory provisions, procedure and frequently asked questions on backend appointment of Directors:

REGULATORY PROVISIONS

In accordance with the Section 168(3), when all the Directors vacates their office (i.e. become disqualified in our case), then the Central Government (power delegated to Regional Directors) shall appoint the required number of Directors who shall hold office.

PROCEDURE

1. Decide upon at least two persons in case of private Company and three persons in case of public Company who shall act as proposed Directors of the Company and obtain their consent, DIR-8 and MBP-1.

2. Convene a meeting of the promoters/shareholders to pass resolution for appointment of Directors.

3. File the application with the ROC along with the following documentations:

• Request letter signed by the Promoters/shareholders of the company explaining the facts and requesting for insertion of at least one director through the backend of the MCA portal;

• Certified true copy of the resolution passed by the promoters/shareholders in the general meeting;

• Proof of dispatch of notice of general meeting to promoters;

• List of shareholders along with the proof of shareholding;

• Minutes of the general meeting;

• Indemnity bond from each shareholder that there is no management dispute among the Company, its shareholders and Directors;

• Certificate from professional certifying the register of members and other connected records.

4. The office of the Registrar of Company shall forward a report to the Regional Director and upon scrutiny, they shall add one Director on the Board of the Company and the same shall be reflected on the MCA portal of the Company.