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Data Analysis- DIR 3 KYC

Data Analysis- DIR 3 KYC

According to data published by “The Times of India”, less than 12 lakh individuals or just over 35% of the 33 lakh “active directors” have complied with the newly mandated know your customer or KYC requirement to be eligible for board positions in Companies. There are (approx.) 21 Lakh Individuals failed to do their KYC within time frame as given and extended by MCA. 

 The Deadline ended on midnight (Saturday) and the MCA is unlikely to further extend it. Now MCA freeze the DIN of those who do not meet new guidelines. Earlier this year, MCA had mandated the individuals with DINs their KYC with MCA up to 31st August but it was extended to September 15. The move was part of a clean meant to rid several company boards of drivers, domestic helps, and other who were nominated on company board without their knowledge.

The deactivated DIN will active only after comply with the registration requirement and pay a fee of Rs. 5000. While close 50 lakh DINs have been issued, only 33 lakh were considered to be active director. 

 Even among this lot, a large number is likely to be ghost directors. The KYC rules are part of a larger exercise to shut down shell companies and identify those with “Significant beneficial ownership” or entities hold more than 10% stake in listed and unlisted companies. As part of the crackdown on shell companies nearly three lakh companies that had not filed returns have been deregistered and over three lakh directors have been disqualified.

 The Government believes that shell companies and bogus directors are likely to generating black money by creating layers, investing through layers and integrating investments. Funds are routed through a web of companies, whose real ownership is not easily traceable. For tracing these transactions, government has taken various step i.e restrictions on layers of investment, coverage of related party transactions, amendment in prevention of money laundering Act. While PAN for most of the directors has already been linked, the government has also mandated linking of Aadhaar with DINs. Those without Aadhaar have been exempted for the moment. DIN holders are also required to sign a form that needs to be authenticated by a Company Secretary or Chartered accountant. 

 Consequences of non- filling-

 * A penalty of Rupee 5000.
 * Unable to file MGT-7 & other fillings with MCA.

DIN allotted after 31st March 2018?


The coverage of DIR- 3 KYC was only for those individuals, who have been allotted DIN on or before 31st March, 2018. The individual applied or allotted DIN after 31st march 2018 still remain active in MCA and no liability will arise in future. 

 Regards, Gaurav Gupta, 
Semi qualified CS, 
Former Legal Associates, Compliance Chambers 

 (Data source- Times of India)

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