Introduction

Ministry of Corporate Affairs had come up with a revolutionary idea to restructure the DIN database through an amendment in Companies Act 2013. MCA vide Amendment in Companies (Appointment and Qualification of Directors) Rules, 2014 dated 05 July 2018 seek all directors to update their basic information through Form DIR3 KYC,the great amendment in the DIN Structure of/for directors of India in order to trace the dummy directorship and updating of the Registry maintained by it. It is a much-needed action that is undertaken by the Government to get updated details of all the Directors including inter alia those directors who have been disqualified from the directorship due to any reason what so ever, on an annual basis which will lead to increased transparency in the conduct of businesses. Just like the Banks, that has mandated KYC, a step has been taken by MCA to verify the identification of all person who so ever holds DIN. Let us understand more about what is E-KYC.

Am I required to file Form DIR 3 KYC

After the stringent action taken by the Ministry of Corporate Affairs, a question arises in the mind of every person holding DIN that does they need to file KYC? According to the notification by the abovesaid authority below individuals are required to file KYC:

1. Every individual who has been allotted Director Identification Number (DIN) on or before 31 March 2018 and whose DIN status is “Approved”.
2. Every individual who has been allotted Director Identification Number (DIN) after 31 March 2018
3. All the individuals who have been disqualified by ROC from acting as Director.

Time Line/ Due Date for Filing of DIR 3 KYC

Government Charges for Filing of DIR 3 KYC

Basic Requirements for Filling DIR 3 KYC

1. Proof of Permanent Address;
2. Copy of Aadhar Card  – In case “yes” is selected in the field “Whether a citizen of India”
3. Copy of Passport – in case “Yes” is selected in the field “Do you have a valid passport”
4. Unique Personal Mobile Number and Unique Personal Email ID and this will be duly verified by One Time Password (OTP). Further OTP button will be enabled only after successful Pre-scrutiny of the form. Click on this button to send OTP to your mobile number and email ID. Please note that separate OTPs will be sent to the mobile number and email ID. Further, please note that OTP can be successfully sent to the mobile number and email ID against one form, for a maximum of 10 times in one day and twice in a span of 30 minutes.
5. PAN-based Digital Signature Certificate which can only be availed through
   • Video Verification or
   • Thumb impression verification
6. Certified copy of Valid ID and address proof along with a copy of PAN/Passport  of the Individual
7. This DIR 3 KYC including authenticity of information’s thereunder shall be certified by Practicing professionals e.g. CA/CS/CWA.

Benefits of DIR 3 KYC

1. Record of Actual Data: This step will help to update the registers of Ministry with the data of Individual Directors along with their valid email ID and mobile number for contact.
2. Easy access to trace Directors: It will be easy for the Government to trace the Directors of the Company as the same shall be updated annually.
3. Elimination of the concept of Dummy Directors: In many Companies, many employees are appointed as the Director of the Company without having any knowledge. This Drive will help to avoid such a situation as the DSC are Aadhar based. It will be very difficult to appoint dummy directors.
4. Cleansing of DIN Database Extraction of Valid DIN: DIR3KYC will help to extract details of valid DIN Holders. As only those person who is willing to hold their DIN will file their KYC. All such DIN allotted to a deceased person or who are holding multiple DIN will be extracted out easily with this move.
5. OTP based verification: This verification shall be completed by One Time Password (OTP) sent on the Email ID and Mobile number as given by the DIN Holder.
6. Liability of Individual and Professional: The responsibility of validity or authentication of details shall be director of the Individual and professional. They cannot take the plea that they have filled the form on undue influence or were not aware of such filling.

Consequences of Non-filling

1. Status of DIN: In case of non-filling, the status of DIN shall be automatically changed to ‘Deactivated’ with reason as ‘Non-filing of DIR 3 KYC’ after the expiry of due date.
2. An attraction of fees: No fees have been levied for E-Form DIR-3- KYC, if filed on or before the due date. Delay in the filling would attract heavy fees of Rs. 5,000/-

Conclusion

KYC of Directors is a welcome step as it will not only help Government to keep an updated database of Directors but it will also help to create a check over fraudulent business transactions that were used to carry on in name of fake Directors. Therefore, it is advisable to update and file DIR 3 KYC timely to hold Directorship in the Company and to avoid additional fees and other consequences of non-filling.