Can director continue in the board after being arrested

696 votes

A director can continue in the board after being arrested and being in jail for three weeks. However, this shall be subject to the provisions related to a director in the articles of association of the company.
As per Section 164 read with Section 167 of Companies Act, 2013, a director shall be considered to be disqualified or his office shall be considered vacant only if he is convicted for an offence of moral turpitude. A 'conviction' in this case shall only be a final order of a court.

Advocate Anuroop Omkar LawRato

889 votes

Under Section 164 of the Companies Act, 2013 a person may be disqualified from being a Director if " he has been 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 and a period of five years has not elapsed from the date of expiry of the sentence".

Therefore, the legal disqualification happens only upon the 'conviction of any office' and sentenced to imprisonment of NOT LESS THAN 6 months. Taking into account that the Director has been arrested and has been in Jail for 3 weeks, however the arrest may be as an under-trial and not as a part of the ''conviction'. Therefore, first you would have to determine whether this arrest is pursuant to a 'Conviction' for a period NOT LESS THAN 6 months. If it satisfies the criteria, then the Director is automatically disqualified and may be easily removed.

However, if the arrest is because of some other situation, such as being placed under arrest during the pendency of a trial, then the same would not amount to a 'conviction' and the automatic qualification may not apply. However, the Articles of Association of the Company in which such person is the Director, may prescribe more stringent criteria for disqualification and the same would have to be reviewed prior to determining whether such Director may be removed from the Board.

Advocate Aditya Shamlal LawRato

698 votes

The answer to your query lies in Section 164 of the companies act which states that:
The person is disqualified from continuing as a director of a company if he has been convicted by any court of law for any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence.
Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;

Advocate Aditya Gupta LawRato