MCA makes Directors KYC mandatory

The Ministry of Corporate Affairs has bought in new norms for Directors KYC. Through this, the government wants to know more about the top people linked to companies, that is, the directors.

The new rules make KYC compliance mandatory for the directors of all companies. To this effect, the Companies Rules, 2014 was amended (Appointment and Qualification of Directors) and brought into force on July 10, 2018. There are several pressure points to the new Directors KYC compliance, but let's look at the critical aspects of the new norms. 

Under the rule 12A, Directors KYC is to be submitted via eForm DIR-3 along with a set of supporting documents. This is to be signed digitally using the Director’s own Digital Signature and must also be certified by a practising Company Secretary or Chartered Accountant.

List of Supporting Documents (Self-attested by the Director):

• PAN Card
• Aadhar Card
• Passport (for foreign directors in Indian Companies)
• Address Proof (Such as - Telephone bill or Electricity Bill

Apart from this, the director would also have to mention his / her mobile number and email ID in the form, which would be verified by an OTP.

Applicability: The new norms apply to Directors of all the companies, whether they are actively holding office or not. The rules also apply to all Designated Partners of LLPs. Disqualified directors would also have to file the DIR-3 form. However, they would need to update their Directors Identification Number (DIN), and submit the Directors KYC form with an addendum.

Dates for Filing: The Directors KYC is a yearly compliance, to be filed annually. For all Directors with an active DIN in a financial year (April – March), the DIR-3 form must be submitted no later than April 30 of the next fiscal. However, only for Financial Year 2017-18, the form would have to be filed no later than August 31, 2018. The late filing charges are INR 5,000 per form. Also, failure to submit the form will lead to strike-off of the director’s DIN.

In the backdrop of bogus corporate practices and misrepresentation, the Ministry wants to add this level of check to prevent people from falsifying director's details. For instance, there have been cases where people have added their house help as company directors, and such people are not even aware of this. Apart from non-existent and fake directors, there are also cases of shell companies. So, it's hoped that the Directors KYC norms would ensure that only genuine people sit on the board of companies.