Stock exchanges have sent notices to listed companies that share directors who have been disqualified for associating with other firms which haven’t filed their financial statements or annual returns for three years.
The notices ask such firms to explain why their directors have been disqualified and when the companies plan to replace them, said two people with direct knowledge of the matter. At least 500 publicly traded firms shared directors with suspected shell companies.
“The National Stock Exchange of India or NSE has so far sent out 307 notices to listed companies in two tranches seeking explanations on their disqualified directors. The first set of 210 notices were sent in last week of September and 97 notices were sent on Friday,” one of the two people cited above said on condition of anonymity.
As per the MCA directive, these directors cannot serve on the board of any company for the next five years. Some of the directors were disqualified retrospectively from November 2015.
Any digital signatures by these directors on annual reports, financial results and other company documents will not be accepted by Registrar of Companies (RoC).
“While most of (the) firms are small with suspended share trading, about 50 companies impacted are larger companies and are in BSE top 500.
Even the exchanges are facing this difficulty “as in some cases there are only names and not the director identification number or DIN for clear identification”, said the second person cited earlier.
“In some cases the names look familiar but DIN is not readily available for clear identification. In some cases the concerned director had stepped down from the company about seven years back so he/she cannot be associated with company,” added this person.
Such directors are being encouraged to approach the MCA for a clarification, he added.
“Any action on directors of unlisted companies could have a spillover impact on the listed company space if they share common directors. While the Companies Act is seemingly ambiguous on whether these disqualified directors can continue to hold other functioning directorships, if and when these directors are asked to vacate their offices, it will step up demand for qualified directors from here on.
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