DINs of disqualified directors to be analyzed under the Companies Act

DINs of disqualified directors to be analyzed under the Companies Act

Ministry of Corporate Affairs reexamines barring of erring firms' directors

The Ministry of Corporate Affairs (MCA) is working on lifting the red flag on directors who completed a five-year disqualification for the default of the companies they were associated with.

The ministry notified that the Director Identification Numbers (DINs) of directors found to be disqualified post-demonetization, has been deflagged, as the duration of the restriction was over.

The DIN is an 8-digit single identification number assigned by the central government. It is given to every person who wants to be a director of any business or who already is an executive of any company. Once granted, the DIN number has life-long validity.

The DINs were flagged under a section of the Companies Act, which specified certain defaults by companies for which the directors were held responsible. These included companies defaulting on filing financial statements or annual returns for three years.

The Ministry had deactivated more than 19 lakh DINs in its database due to non-filing of Know Your Client (KYC) and over four lakh directors were disqualified under the provisions of the Act. (The terms 'Ghost Directors' and 'Shell Companies' were not defined in the Companies Act, 2013).

The lifting of the red flag would mean that these directors could now be re-appointed as a director of that company or any other company.