Disqualification Of Directors Is It A Tale Of Blunders?

 

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The Companies Act 2013 (the 2013 Act) was introduced when the earlier law (that is, the Companies Act, 1956) was in need of a substantial revamp to make it contemporary and relevant to global practices.

The 2013 Act has introduced higher standards of transparency and accountability in order to transform the existing corporate governance practices. In the process of bringing the aforementioned attributes to the earlier law, the 2013 Act has stipulated significant changes in the role of directors in a company with an unprecedented responsibility on the directors of the company to act with greater wisdom and prudence. The 2013 Act has brought in provisions that not only prescribe the directors to be aware of the decisions taken by the management of the company in which they participated but also of the decisions which they were not a part. Further, the 2013 Act has inserted stringent penal provisions which did not feature in the earlier law. Under the new provisions, a director is not only tied to the law but could also be severely whipped for consequences beyond his/her control. The recent move of the Ministry of Corporate Affairs in disqualifying directors without a prior notice would indeed cause a jitter in many minds.