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Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003

Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003

Notification No. G.S.R. 830(E), dated 21-10-2003

In exercise of the powers conferred by clause (b) of sub‑section (1) of section 642 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following rules to carry out the purpose of clause (g) of sub‑section (1) of section 274 of the said Act, namely :—

1. Short title, commencement and extent.

(1) These rules may be called the Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003.

(2) These rules shall come into force from the date of their notification in the Official Gazette.

(3) These rules shall apply to all public limited companies registered under the Companies Act, 1956.

2. Definitions.

In these rules, unless the context otherwise requires, ‑

(a) “disqualifying company” is the company in which the default has occurred on account of which a director stands disqualified;

(b) “appointing company” is the company in which an individual is seeking appointment as a director, including re-appointment as director.

3. Disqualifications under clause (g) of sub‑section (1) of section 274 of the Companies Act, 1956.

(a) Whenever a company fails to file the annual accounts and annual returns, as described in sub‑clause (A), of clause (g) of sub‑section (1) of section 274, persons who are directors on the last due date for filing the annual accounts and the annual returns for any continuous three financial years commencing on and after the first day of April 1999, shall be disqualified.

(b) If a company has failed to repay any deposit, irrespective of the enactment, rules or regulations under which the deposits have been accepted by the companies, or interest thereon, or redeem its debentures, or pay any dividend declared on the respective due dates, and if such failure continues for one year, as described in sub‑clause (B) of clause (g) of sub‑section (1) of section 274, then the directors of that company shall stand disqualified immediately on expiry of that one year from the respective due dates:

Provided that all the directors who have been directors in the relevant year, from the due date to the expiry of one year after the due date, will be disqualified:

Provided further that disqualification on account of the reasons cited under this Rule shall also apply to the reappointment as a director.

Explanation.‑ For the purpose of this rule, it is clarified that non‑payment of dividend referred to in sub‑clause (B) of clause (g) of sub‑section (1) of section 274 due to the reason of dividend not being claimed or kept in separate bank account as required under section 205A of Companies Act, 1956 or paid into investors Education & Protection Fund as required under section 205C of that Act shall not be deemed to be a failure to make payment of dividend.

4. Duty of Statutory Auditor to report on disqualification.

(a) It shall be the duty of statutory auditor of the appointing company as well as disqualifying company, as required under section 227(3)(f) to report to the members of the company whether any director is disqualified from being appointed as director under clause (g) of sub‑section (1) of section 274 and to furnish a certificate each year as to whether on the basis of his examination of the books and records of the company, any director of the company is disqualified for appointment as a director or not.

(b) It shall be the duty of the statutory auditors of the "disqualifying company" as required in section 227(3)(f) to report to tire members of the company whether any director in the company has been disqualified during the year from being re‑appointed as director, or being appointed as director in another company under clause (g), of sub‑section (1), of section 274.

5. Duty of company to intimate disqualification.

Whenever a company fails to file the annual accounts and returns, or fails to repay any deposit interest, dividend, or fails to redeem its debentures, as described in sub-clauses (A) and (B) of clause (g) of sub‑section (1) of section 274, the company shall immediately file a return in duplicate in Form ‘DD-B’, prescribed under these rules for this purpose, to the Registrar of Companies, furnishing therein the names and addresses of all the Directors of the company during the relevant financial years:

Provided that names of such directors who have been exempted from application of section 274(1)(g) by the Central Government, from time to time, shall be excluded.

Provided further that no unusual abbreviations or short forms shall be used in filling up the Form ‘DD-B’, which shall give such details as may be necessary to distinguish and identify each director without any ambiguity.

6. Failure to intimate disqualification shall render director as officer in default.

When a company fails to file the Form ‘DD‑B’ as above within 30 days of the failure that would attract disqualification under section 274(1)(g), officers of the company listed in section 5 of the Companies Act, 1956 shall be officers in default.

7. (a) Upon receipt of the form ‘DD‑B’ in duplicate under Rule 5, the Registrar of Companies shall immediately register the document and place one copy of it in the document file for public inspection.

(b) The Resistrar of Companies shall forward the other copy to the Central Government.

8. Names of the disqualified directors on the website etc.

(a) The Central Government shall place on the website of the Department of Company affairs the names and addresses and such other details including names and details of the companies concerned, as may be necessary, in respect of all the disqualified directors.

(b) The Central Government may also publicize the names of disqualified directors in such manner as it may consider appropriate.

(c) The Central Government shall take such steps as may be required to update its website to ensure that name of the person, in whose respect disqualification period has expired after 5 years is deleted from the website.

9. Duty of every director.

Every director in a public company registered under the Companies Act, 1956 shall file Form ‘DD-A’, prescribed under these Rules, before he is appointed or re-appointed.

10. If any question arises as to whether these rules are or are not applicable to a particular company, such question shall be decided by the Central Government.

11. Punishment for contravention of the rules.

If a company or any other person contravenes any provision of these rules for which no punishment is provided in the Companies Act, 1956, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one with a further fine which may extend to five hundred rupees for every day after the first, during which the contravention continues.

12. On the commencement of these rules, all rules, orders or directions in force in relation to any matter for which provision is made in, these Rules shall stand repealed, except as respects things done or omitted to be done before such repeal.




Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003

Intimation by Director

[Pursuant to Section 274(1)(g)]


Registration No. of Company ……………………………..


Nominal Capital Rs. ……………………………..

Paid‑up Capital Rs. ……………………………..

Name of Company ……………………………..


Address of its Registered Office ……………………………..




The Board of Directors

of …………………………………



I…………………son/daughter/wife of…………………resident of……………………director/managing director/manager in the company hereby give notice that I am/was a director in the following companies during the last 3 years:—

Name of the company

Date of Appointment

Date of Cessation

1. ……………………



2. ……………………



I further confirm that I have not incurred disqualification under section 274(1)(g) of the Companies Act, 1956 in any of the above companies, in the previous financial year and that I, at present, stand free from any disqualification from being a director.


I further confirm that I have incurred disqualifications under section 274(1)(g) of the Companies Act, 1956 in the following company(s) in the previous financial year, and that I, at present stand disqualified from being a director.

Name of the company

Date of Appointment

Date of Cessation

1. ……………………



2. ……………………





(Full Name)

Dated this…………..day of…………..




Report by a public company

[Pursuant to section 274(1)(g) read with rule 5 of Companies (Disqualification of Directors under section 274(1)(g) of the Companies Act, 1956) Rules, 2003]

Registration No. of Company…………………….

Nominal Capital Rs……………………………….

Name of Company ………………………………

Address of its Registered Office………………………




The Registrar of Companies,


It is hereby reported under section 274(1)(g) of Companies Act, 1956, that M/s……………………..have failed to (i) file the annual accounts and annual returns for the last three financial years, or (ii) repay deposits or interest thereon on due date being ……………or redeem its debentures on due date being…………………..or pay dividend declared by the company since………………or both. The period of one year has expired on …………………


The name and address of directors at the relevant period are as under:‑

(a) Director's name in full, without abbreviations

(b) Director's name as per company's records (abbreviations may be expanded and shown)

(c) Address of the Director : (i) Permanent

(ii) Present

(d) Positions held by the director in the last 5 years, prior to disqualification:





Dated this …………………day of………………

*State whether Director, Managing Director, Manager or Secretary.


Vijaya Bank to implement GAAP prior to ADR float

27th October 2003: Vijaya Bank is planning an ADR issue and as a pre-requisite for the issue, the bank is implementing US GAAP Accounting. The bank has short-listed PricewaterhouseCoopers (PwC) for the execution of the US GAAP Accounting. Though the exact time of the launch of the ADR issue is not clear, the Board of Directors has approved the implementation of US GAAP and the process is likely to be completed by the end of November. The bank will then proceed for the necessary approvals from the Ministry of Finance (MoF) and Reserve Bank of India. As a result of the alliance with Principal Group of the US, the bank is now focusing on increasing its presence beyond national borders. The confidence of overseas investors has increased after the Bank joined hands with Principal Group for life insurance, pension and asset management. The Bank is likely to open representative offices in Dubai, China, Hong Kong and Singapore. The bank has also got permission to open branches in special economic zones (SEZ) along with three other banks – Union Bank of India, Bank of Baroda (BoB) and State Bank of India (SBI).

The recent public issue of Vijaya Bank got oversubscribed by almost 17.5 times. Even FIIs have invested in the primary market for acquiring Vijaya Bank stock. The bank got subscription of Rs. 4200 crore against a target of Rs. 240 crore from the primary market. Vijaya Bank has recorded a 154% jump in its net profit for the second quarter ended September 30, 2003 at Rs. 95.9 crore compared to Rs. 37.7 crore in the corresponding period last year. The bank’s total income, for the period under review, rose from Rs. 460 crore to Rs. 631.7 crore. Vijaya Bank’s share is currently quoted at Rs. 37.80 against the offer price of Rs. 24 in IPO.

Simplified Exit System not for major offences: Department of Company Affairs

11th October 2003: The Simplified Exit Scheme (SES) had been announced late March this year to enable companies that do not have adequate paid up capital to get their names removed from the register of companies. The department of company affairs (DCA) has now announced that prosecution against companies that are seeking to strike their names off the register of companies under SES can be withdrawn only if the offences committed are minor. The prosecutions would not be withdrawn if the offences committed were such that the penalty involves punishment by imprisonment. For minor offences such as non-filing of balance sheet and other documents, the department has said that the prosecution would be withdrawn after publication of a final notice in the official gazette for striking off the name of the company from the register. The DCA has further clarified to the queries from its field offices – regional directors and registrar of companies – that SES will be unavailable to companies that are under investigation or have been named in the list of vanishing companies or plantation companies and also to companies that are involved in any stock market scam. Section 205 companies, that is, companies set up for charity, would also not be allowed to seek exit under the SES.

SEC okays shareholder ‘proxy access’ plan

10th October 2003: US REGULATORS gave initial approval to a plan that would let shareholders nominate board directors using official company ballots in order to boost the power of investors in the boardroom. The Securities and Exchange Commission’s (SEC) decision drew criticism from big businesses and praise from investor activists who wanted to wrest control from CEO’s of weak boards like those that slept through the scandals at Enron and elsewhere. The SEC voted unanimously to send its proposed shareholder “proxy access” plan out for 60 days of public comment, with a final vote to follow by the five-member commission. Speaking for the Business Roundtable, a powerful Washington lobbying group for chief executives, Pfizer CEO Henry Mckinnell said the SEC proposal risks “special interest groups hijacking the director election process”. He further said that the roundtable is concerned that the SEC’s rules will lead to divisive boards.



DCA introduces simplified exit scheme for defunct or non-operative Companies

2nd May, 2003. The Department of Company Affairs has recently annonced a simplified exit scheme for companies who are not carrying on any activites and who have no plans to carry on any activity in future. Such companies have to incur unnecessary expenditure for their maintenance-annual audit, secretarial work etc. or otherwise for their closure, they have to follow lengthy winding up procedure. Now , the DCA Scheme provides that any such Company who who wants to strike its name off the Register of Companies, should fill-up the prescribed form and submit the same alongwith a copy of Audited Balance Sheet and p & L Account and an affidavit as prescribed, indemnity bond in prescribed form and demand draft of Rs. 2000/- payable to concerned Registrar of Companies.The Scheme will remain in force till 31st December, 2003.companies can prepare their audited annual accounts upto 30th September, 2003 and file with ROC.No NOC from Banks, etc. would be required for closure of Companies. ROCs will advertise on a monthly basis in newspapers, a list of companies to be struck off.

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