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Section 167 of Companies Act – Vacation of Office of Directors

Last Update Date : April 29, 2019
Estimated Read Time: 3 min

section 167

After a certain period, every law becomes out-dated and changes need to be brought about based on present day situations. When the Companies Act 1956 was passed, the changes of the future couldn’t be foreseen by the makers of the Act. Certain amendments over the past few years created some difficulties for companies to perform in the significantly changed scenario. The new Companies Act 2013 was introduced by the Parliament of India that has enabled for the smooth functioning of companies by regulating the company incorporation, its responsibilities, directors/secretaries along with the dissolution of the company.
Let’s look at Section 167 of Companies Act 2013 that deals with the vacation of office of the director of company.

Section 167 – Vacation of Office of Director

1) The office of a director shall become vacant in case:

  1. he incurs any of the disqualifications specified in section 164;
    he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board;
  2. he acts in contravention of the provisions of section 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested;
  3. he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of section 184;
  4. he becomes disqualified by an order of a court or the Tribunal;
  5. he is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than six months:
  6. Provided that the office shall be vacated by the director even if he has filed an appeal against the order of such court;
  7. he is removed in pursuance of the provisions of this Act;
  8. he, having been appointed a director by virtue of his holding any office or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company.

2) If a person, functions as a director even when he knows that the office of director
held by him has become vacant on account of any of the disqualifications specified in subsection

  1. he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.
  2. Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section (1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.
  3. A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1).

For all your tax related queries and to maximize on tax savings/deductions, consult the experts at H&R Block India.

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Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.

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