Vacation of Office of a Director: Section 167

Vacation of office of a director under section 167 of the Companies Act, 2013 is not a decision anyone takes. The section lists eight events, and on any of them the office "shall become vacant" by operation of the statute. No board resolution, no shareholder vote and no acceptance is required, which is what separates this from resignation and from removal.

What are the grounds for vacation of office of a director?

Section 167(1) lists them as clauses (a) to (h):

Clause (b) is the one most often misread. It bites only on absence from all the meetings in a twelve-month window. One attendance in the window defeats it, and the words "with or without seeking leave of absence" mean that leave granted by the Board does not save the office.

Clause (a) carries a proviso inserted by Act 1 of 2018, section 54, with effect from 7 May 2018, and it narrows the reach of a section 164(2) disqualification: where a director incurs it, the office becomes vacant in all the companies other than the company which is in default under that sub-section. So the director keeps his seat on the defaulting board and loses the others.

How long does a director have after a conviction?

Clauses (e) and (f) are the two grounds that arrive by court order, and the proviso to section 167(1), substituted by Act 1 of 2018, section 54, with effect from 7 May 2018, gives them a staged suspension rather than immediate effect. The office shall not be vacated:

1. for thirty days from the date of conviction or order of disqualification;
2. where an appeal or petition is preferred within those thirty days, until expiry of seven days from the date on which that appeal or petition is disposed of; and
3. where a further appeal or petition is preferred against the order or sentence within those seven days, until such further appeal or petition is disposed of.

No such staged window attaches to clauses (a) to (d), (g) or (h). Those vacate the office on the event.

What is the penalty for sitting on after the office is vacant?

Section 167(2) covers the director who keeps functioning knowing his office has become vacant. He is liable to a fine of not less than one lakh rupees, extending to five lakh rupees.

That sub-section reads differently today from how it was enacted, and the change is decriminalisation. Act 29 of 2020, section 34, with effect from 21 December 2020, omitted the words "with imprisonment for a term which may extend to one year or", and substituted the closing limb for the earlier "five lakh rupees, or with both". Anything citing an imprisonment term under section 167(2) is quoting the pre-2020 text.

Who runs the company if every office is vacated?

Section 167(3) covers the total-vacancy case. Where all the directors of a company vacate their offices under any of the section 167(1) disqualifications, the promoter, or in his absence the Central Government, shall appoint the required number of directors, who hold office until directors are appointed by the company in the general meeting.

Section 168(3) attaches the same fallback to the resignation route, and it is drafted to cover both: where all the directors resign from their offices or vacate their offices under section 167, the same promoter-then-Central-Government appointment applies. The two sections therefore leave no gap between a board that quits and a board that is emptied by operation of law.

Section 167(4) then adds a private-company power. A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those in section 167(1). The sub-section confers no equivalent power on a public company, and none on the articles to remove a statutory ground.

Where vacation of office shows up in a filing

A vacated office is a change in the board, so it reaches the public record the same way an appointment does: through the return of directors and key managerial personnel that section 170(2) requires to be filed with the Registrar within thirty days of any change. For a listed company the exchange intimation follows the same event. The practical consequence for anyone reading a board list is that a director may have ceased to hold office before any document says so, because section 167 operates on the event and the filing follows it.

Where this sits in the disclosure picture

• Resignation of a director under section 168 covers the voluntary route, and the section 168(3) fallback that section 167 shares.
• Removal of a director under section 169 covers clause (g), removal in pursuance of the Act.
• Director disqualification under section 164 covers the disqualifications that clause (a) imports.
• Disclosure of interest by a director covers the section 184 duty that clauses (c) and (d) enforce.
• Duties of a director under section 166 covers the statutory duties that survive a vacated office for acts during tenure.
• Additional, alternate and nominee directors covers the appointment routes a casual vacancy is filled through.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.