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TMI BlogDisqualification of Directors under Section 274(1)(g) of the Companies Act, 1956 - ClarificationX X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of this Section. Through this clause a director of a public company, which has made defaults in filing of annual accounts and annual returns and in repaying deposits/interests thereon on due date or redeeming its debentures on due date or in paying dividend for period specified in that Section, is disqualified to be appointed as director of other public companies for a period of five years from the date on which such public company(ies) so defaulted. 2. A high proportion of the companies had been defaulting in filing the annual accounts and annual returns and a large number of companies were defaulting in repayment of deposits/interest thereon and in redemption of debentures which put investor to lots of hardships and the remedial act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nks and the nominees of Central and State Government companies. 5. The Government has decided to (i) clarify the legal position in respect of the Public Financial Institutions/Banks having non-obstante clause in their statute (ii) to give some relief to the nominees of the Public Financial Institutions/Banks/Central and State Government; and (iii) to exempt Government Companies from the applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956. 6. While considering the applicability of the provisions of Section 274(1)(g) of the Companies Act, 1956, the Government has taken into account the following points: (i) In addition to protecting the interests of the Public Financial Institution/Bank which they represent, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy. (iii) Ensure strict compliance in letter and spirit of all the statutory provisions in particular the provisions of the Companies Act and the regulations, clarifications etc. issued there under. It is the duty of the nominee directors to fully acquaint themselves in the relevant provisions of the Company Law and ensure that measures are instituted to monitor and certify that these statutory provisions are being observed. (iv) The Nominee Directors should see that important committees of the Board of Directors are constituted and are functioning effectively such as Audit Committee, Nominations Committee, Remuneration Committee etc. The Nominee Directors are expected to seek membership of these important committees and through their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure that their Nominee Directors are discharging their responsibilities. The Financial Institutions should also in a separate section of their Annual Report clearly bring out the measures instituted by them to ensure that the system of Nominee Directors is functioning effectively. 8. Accordingly, it is clarified that: (i) Nominee Directors appointed by the Public Financial Institutions and Companies established under the Acts of Parliament having non-obstante provisions over the Companies Act, 1956, like IDBI, LIC, UTI, IIBI etc., in their respective statutes shall not be liable to be disqualified for appointment as directors by virtue of Section 274(1)(g) of the Companies Act, 1956. (ii) Nominee Directors appointed on the Boards of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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