1. The office of a director shall become vacant in case—
a. he incurs any of the disqualifications specified in section 164;
b. 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;
c. 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;
d. 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;
e. he becomes disqualified by an order of a court or the Tribunal;
f. 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:
Provided that: the office shall be vacated by the director even if he has filed an appeal against the order of such court;
g. he is removed in pursuance of the provisions of this Act;
h. 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.
3. 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.
4. 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 ).
Legal Commentary & Landmark Judgments: Section 167
Section 167 specifies the statutory triggers resulting in the automatic and immediate vacation of office of a director, including disqualification under Section 164 and continuous absence from board meetings.
Section 167(1)(b) contains a lethal compliance trap: continuous absence from all board meetings for twelve months—even with approved leaves of absence—results in automatic vacation of directorship. Companies cannot waive or condone this vacation in their articles. When vacation occurs, Form DIR-12 must be filed with the ROC, and any further board resolutions signed by the vacated director are null and void.