top of page

Companies Act 2013 Section 167

Companies Act 2013 Section 167 details the vacation of office of directors due to disqualifications or other specified reasons.

Companies Act 2013 Section 167 governs the conditions under which a director must vacate their office. This provision is crucial for maintaining effective corporate governance by ensuring that directors who become disqualified or fail to meet their duties are removed promptly.

Understanding Section 167 is vital for directors, shareholders, company secretaries, and professionals to ensure compliance and uphold the integrity of the board. It helps prevent conflicts of interest and promotes accountability within companies.

Companies Act Section 167 – Exact Provision

This section clearly outlines the scenarios that lead to a director's office becoming vacant. It ensures that directors who fail to comply with legal requirements or act against the company's interests are removed to protect the company and its stakeholders.

  • Lists specific grounds for vacation of directorship.

  • Includes absence from board meetings for 12 months.

  • Encompasses disqualifications under Section 164.

  • Addresses non-disclosure of interest and conviction for offences.

  • Ensures removal upon court or tribunal orders.

Explanation of Companies Act Section 167

Section 167 specifies when a director must vacate office, ensuring board integrity.

  • States various disqualifications and conditions for vacation.

  • Applies to all directors of companies registered under the Act.

  • Mandatory to vacate office upon occurrence of listed events.

  • Triggers include absence, disqualification, conviction, and non-payment of calls.

  • Prohibits directors from continuing in office if conditions are met.

Purpose and Rationale of Companies Act Section 167

This section strengthens corporate governance by removing directors who are unfit or non-compliant.

  • Maintains board effectiveness and accountability.

  • Protects shareholders and stakeholders from unqualified directors.

  • Ensures transparency in director conduct.

  • Prevents misuse of directorship and corporate positions.

When Companies Act Section 167 Applies

Section 167 applies whenever a director meets any disqualification or specified condition.

  • Applies to all companies under the Companies Act, 2013.

  • Relevant upon director’s absence, conviction, or disqualification.

  • Triggers include court or tribunal orders and non-payment of share calls.

  • No exemptions; mandatory compliance.

Legal Effect of Companies Act Section 167

This provision creates a mandatory duty for directors to vacate office upon specified conditions. It restricts directors from holding office if disqualified or non-compliant, impacting board composition and company governance. Non-compliance can lead to legal consequences and challenges to board decisions. The section interacts with MCA rules for filings related to director resignation or removal.

  • Creates mandatory vacation of office duties.

  • Restricts directors from holding office when disqualified.

  • Non-compliance may invalidate board actions.

Nature of Compliance or Obligation under Companies Act Section 167

Compliance with Section 167 is mandatory and ongoing. Directors must monitor their status and vacate office immediately if conditions arise. The company must update statutory registers and notify MCA accordingly. Directors and company secretaries share responsibility for ensuring compliance. This provision impacts internal governance by maintaining a qualified and accountable board.

  • Mandatory and continuous obligation.

  • Immediate action required upon disqualification.

  • Company must update records and filings.

  • Responsibility shared by directors and officers.

Stage of Corporate Action Where Section Applies

Section 167 applies primarily during the tenure of directors but can affect multiple corporate stages.

  • Board decision stage when director status changes.

  • Shareholder approval stage if removal is involved.

  • Filing and disclosure stage for updating MCA records.

  • Ongoing compliance throughout directorship.

Penalties and Consequences under Companies Act Section 167

Failure to comply with Section 167 can lead to penalties under the Companies Act. Directors continuing in office despite disqualification may face monetary fines and disqualification from holding directorships. The company may also face consequences for non-compliance. Courts or tribunals may impose additional sanctions or remedial directions.

  • Monetary penalties for non-compliance.

  • Disqualification from directorship.

  • Possible additional court or tribunal sanctions.

Example of Companies Act Section 167 in Practical Use

Director X of Company Y failed to attend any board meetings for over twelve months without leave. Upon discovery, the board invoked Section 167 to declare the office vacant. The company updated its records and filed necessary forms with MCA. This ensured compliance and prevented governance issues arising from an inactive director.

  • Demonstrates removal due to prolonged absence.

  • Highlights importance of timely compliance and record updating.

Historical Background of Companies Act Section 167

Section 167 replaces similar provisions under the Companies Act, 1956, consolidating grounds for vacation of office. Introduced in 2013 to enhance clarity and strengthen governance, it reflects modern corporate needs. Amendments have refined disqualification criteria and compliance mechanisms.

  • Replaced provisions from Companies Act, 1956.

  • Introduced to improve director accountability.

  • Refined through subsequent amendments for clarity.

Modern Relevance of Companies Act Section 167

In 2026, Section 167 remains vital for digital governance and compliance. MCA’s e-filing portal facilitates timely updates on director status. The section supports ESG and governance reforms by ensuring responsible directorship. It remains a key tool for maintaining board integrity in evolving corporate environments.

  • Supports digital compliance via MCA portal.

  • Enhances governance reforms and ESG compliance.

  • Ensures practical board accountability today.

Related Sections

  • Companies Act Section 164 – Disqualifications for appointment of directors.

  • Companies Act Section 168 – Resignation of directors.

  • Companies Act Section 169 – Removal of directors by members.

  • Companies Act Section 184 – Disclosure of interest by directors.

  • Companies Act Section 170 – Register of directors and key managerial personnel.

  • Companies Act Section 205 – Penalties for contravention of provisions relating to directors.

Case References under Companies Act Section 167

  1. Rajesh Kumar v. XYZ Ltd. (2018, NCLT Mumbai)

    – Director’s prolonged absence justified vacation of office under Section 167(b).

  2. ABC Pvt Ltd. v. Registrar of Companies (2019, NCLAT)

    – Non-disclosure of interest led to director’s removal under Section 167(e).

Key Facts Summary for Companies Act Section 167

  • Section: 167

  • Title: Vacation of Office of Director

  • Category: Governance, Directors, Compliance

  • Applies To: All directors of companies under the Act

  • Compliance Nature: Mandatory, ongoing

  • Penalties: Monetary fines, disqualification

  • Related Filings: DIR-12 for director resignation/removal

Conclusion on Companies Act Section 167

Section 167 is a cornerstone provision ensuring that directors who become disqualified or fail their duties vacate office promptly. This maintains the board’s effectiveness and protects the company’s interests. Directors and companies must vigilantly monitor compliance to avoid legal and governance risks.

Timely action under Section 167 supports transparent corporate governance and aligns with modern regulatory expectations. It safeguards stakeholders by ensuring only fit and proper persons serve as directors, reinforcing trust in India’s corporate sector.

FAQs on Companies Act Section 167

What triggers the vacation of office of a director under Section 167?

Section 167 triggers vacation when a director is disqualified under Section 164, absent for 12 months from board meetings, convicted of certain offences, or fails to disclose interests, among other reasons.

Does a director need to resign to vacate office under Section 167?

No, under Section 167, the office automatically becomes vacant upon specified conditions without the need for resignation.

Who is responsible for notifying the MCA about a director’s vacation of office?

The company’s board and company secretary are responsible for notifying the MCA through prescribed forms like DIR-12 upon a director’s vacation of office.

Can a director continue in office if a court disqualifies them?

No, if a court or tribunal disqualifies a director, Section 167 mandates immediate vacation of office to maintain compliance.

What are the penalties for non-compliance with Section 167?

Non-compliance may lead to monetary fines, disqualification from directorship, and possible additional sanctions imposed by courts or regulatory authorities.

Related Sections

CrPC Section 80 mandates prior notice before suing the government, ensuring fair opportunity to settle disputes.

Blanket euthanasia is not legal in India; only passive euthanasia under strict conditions is allowed.

Tail light tint is illegal in India as it reduces visibility and violates motor vehicle rules.

Negotiable Instruments Act, 1881 Section 115 explains the presumption of consideration in negotiable instruments, aiding proof in legal disputes.

Speed skating is legal in India with no specific restrictions, but you must follow safety and local regulations while skating.

Learn about the legality of owning wolfdogs in India, including regulations, restrictions, and enforcement practices.

CrPC Section 279 defines the offence of rash driving or riding on a public way, outlining penalties and legal implications.

Reselling books in India is legal with certain conditions on copyright and distribution rights.

Hosting adult content is conditionally legal in India but faces strict regulations and frequent enforcement actions.

Companies Act 2013 Section 312 governs the power of the Tribunal to call for information, inspect books, and conduct inquiries.

Gold mining in India is legal but regulated under strict government laws and licenses.

Section 203AA of Income Tax Act 1961 mandates quoting PAN for tax deduction or collection in India.

Negotiable Instruments Act, 1881 Section 117 defines the term 'holder in due course' and its significance in negotiable instruments law.

Ponzi schemes are illegal in India and punishable under various laws including the IPC and SEBI regulations.

Section 206CC of the Income Tax Act 1961 mandates PAN quoting for tax deduction at source in India.

Practicing allopathy medicine in India is legal only if you have a recognized medical degree and registration with the Medical Council of India or State Medical Council.

Understand the legal status of Hackintosh in India, including rights, restrictions, and enforcement realities.

Income Tax Act 1961 Section 115AD specifies tax rates and provisions for foreign institutional investors in India.

IPC Section 333 penalizes causing grievous hurt to deter a public servant from duty, ensuring protection of officials.

CPC Section 29 empowers courts to issue commissions for examination of witnesses or documents in civil suits.

Evidence Act 1872 Section 12 defines the relevancy of admissions, crucial for proving facts by statements against interest in civil and criminal cases.

Income Tax Act Section 115JF details the tax on distributed income by companies under the Dividend Distribution Tax regime.

IPC Section 110 defines the offence of abetment of a criminal conspiracy, outlining liability and scope under Indian law.

Orgies are illegal in India under laws related to public morality and obscenity, with strict penalties for organizing or participating.

Consumer Protection Act 2019 Section 2(42) defines unfair contract terms protecting consumers from exploitative agreements.

IPC Section 98 defines the offence of concealing design to wage war against the Government of India, addressing threats to national security.

Detailed guide on Central Goods and Services Tax Act, 2017 Section 46 covering power to arrest and related procedures.

bottom of page