Director Disqualification and DIN Deactivation: Causes and Remedies

Directors often find out about a problem only when they try to file a form or join another company’s board, and the MCA portal shows their DIN as “disqualified” or “deactivated”. These are two different situations, with different causes and different remedies.

This article explains why a director becomes disqualified, why a DIN gets deactivated, how to check the status, and what can be done.

Disqualification and DIN deactivation: the difference

Point	Disqualification	DIN deactivation
Cause	Defaults by a company (Section 164(2)) or personal grounds (Section 164(1))	Most commonly, not filing DIR-3 KYC by the due date
Effect	Cannot be appointed or reappointed as a director for the period of disqualification	Cannot use the DIN for filings until reactivated
Remedy	Depends on the ground; may need filings, NCLT or court action	File DIR-3 KYC with the late fee
Time to fix	Can be long	Usually quick

Disqualification because of company defaults: Section 164(2)

A person who is or has been a director of a company is disqualified if that company has:

• not filed financial statements or annual returns for any continuous period of three financial years, or
• failed to repay deposits, or pay interest on them, redeem debentures, pay interest on debentures or pay a declared dividend, and the failure continues for one year or more

Such a person cannot be reappointed as a director of that company, or appointed in any other company, for five years from the date on which the company failed to file or pay.

Effect on other directorships

Under the proviso to Section 167(1)(a), a director disqualified under Section 164(2) vacates office in all other companies, but continues in the company that is in default. This allows the defaulting company to still have directors who can file the pending returns.

New directors in a defaulting company

A person newly appointed as a director of a company that is already in default is not disqualified for the first six months from appointment. If the defaults are not cleared within that time, the disqualification applies.

Personal grounds for disqualification: Section 164(1)

• Being of unsound mind, as declared by a competent court
• Being an undischarged insolvent, or having applied to be declared insolvent
• Conviction for an offence with a sentence of six months or more, as provided in the section
• An order of a court or tribunal disqualifying the person
• Not paying calls on shares held for six months
• Conviction for an offence relating to related party transactions in the last five years
• Not having a DIN
• Holding directorships beyond the limit of 20 companies (10 public) under Section 165

Why a DIN gets deactivated

• DIR-3 KYC not filed: every DIN holder must file DIR-3 KYC (or the simpler web KYC, where eligible) by 30 September of the year it is due; if not filed, the DIN is marked as deactivated. See how to file DIR-3 KYC for directors
• Disqualification: the DIN may show a disqualified status
• Surrender or cancellation: on application by the director, or by the authorities for reasons such as duplicate DINs or a DIN obtained on wrong information

Reactivating a DIN deactivated for KYC

1. File DIR-3 KYC with the late fee (currently ₹5,000)
2. The DIN is reactivated once the form is approved
3. The director can then sign and file forms as usual

How to check your status

• On the MCA portal, use the master data service for the DIN to see its status
• Check the status of each company you are a director in, especially whether annual filings are up to date and whether the company is active, struck off or under strike off
• Check the list of directorships, to see whether any company has stopped filing

What can be done if you are disqualified under Section 164(2)

The disqualification runs for five years from the date of default. The steps usually considered are:

• Clear the defaults: file the pending financial statements and annual returns of the defaulting company, with additional fees. See filing AOC-4 and MGT-7A and penalties for late filing of annual returns
• If the company has been struck off: apply to the NCLT for restoration and then file the pending returns. See how to restore a company after strike off
• If the default was not yours: for example, you had already resigned and the resignation was recorded, gather proof (resignation letter, DIR-11, DIR-12 filed by the company)
• Representation or legal remedy: where there is a genuine error, a representation to the authorities, or a petition before the High Court, may be considered; High Courts have decided such cases differently depending on the facts, so this needs careful review

Filing the pending returns does not by itself remove a disqualification that has already arisen, but it stops further defaults and is usually a necessary first step.

How to avoid disqualification

• Keep annual filings of every company you are a director in up to date. See the annual compliance calendar
• If a company is not doing any business, consider applying for dormant status or closing it properly, rather than letting it stop filing. See strike off versus dormant company and how to close a company voluntarily
• When you resign, file DIR-11 yourself and make sure the company files DIR-12
• File DIR-3 KYC on time
• Before joining a board, check that company’s filing history

Points for directors in Kerala

• Many small companies in Kerala were formed for a project or a family business that later stopped; if annual filings stopped too, every director of that company may be affected
• Directors working abroad, especially in the Gulf, often miss DIR-3 KYC because the registered mobile number or email is no longer in use; keep these updated
• Banks and investors increasingly check DIN status, so a disqualification can affect loans and funding for other businesses

Frequently asked questions

If one company defaults, am I removed from all my companies?

Under Section 164(2) read with Section 167(1)(a), you vacate office in the other companies, but continue as a director in the defaulting company.

How long does disqualification under Section 164(2) last?

Five years from the date on which the company failed to file or pay.

My DIN shows deactivated. Am I disqualified?

Not necessarily. A deactivated DIN is most often because DIR-3 KYC was not filed, which can be fixed by filing the form with the late fee.

Can a disqualified director be a shareholder?

Yes. Disqualification affects the role of director, not the right to hold shares.

ചുരുക്കം (Summary in Malayalam)

ഒരു കമ്പനി തുടർച്ചയായി മൂന്ന് സാമ്പത്തിക വർഷം financial statements അല്ലെങ്കിൽ annual return ഫയൽ ചെയ്തില്ലെങ്കിൽ, അതിലെ ഡയറക്ടർമാർ Section 164(2) പ്രകാരം 5 വർഷത്തേക്ക് അയോഗ്യരാകും. അവർ മറ്റ് കമ്പനികളിലെ ഡയറക്ടർ സ്ഥാനം ഒഴിയേണ്ടി വരും. DIN deactivation സാധാരണയായി DIR-3 KYC ഫയൽ ചെയ്യാത്തതുകൊണ്ടാണ്; late fee അടച്ച് KYC ഫയൽ ചെയ്താൽ DIN വീണ്ടും പ്രവർത്തനക്ഷമമാകും. എല്ലാ കമ്പനികളുടെയും annual filing കൃത്യസമയത്ത് ചെയ്യുക, പ്രവർത്തനമില്ലാത്ത കമ്പനി ശരിയായ രീതിയിൽ അടയ്ക്കുക എന്നിവയാണ് പ്രതിരോധ മാർഗങ്ങൾ.

This article gives a general overview of the law and procedure under the Companies Act, 2013, the rules and related laws. Forms, fees, limits and procedures are revised from time to time; for accurate and current requirements, refer to the Act, the rules as amended and the official portals. The article is not advice on any particular case.