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KYC of Directors in All Indian Companies: Mandatory Annual Compliance on/before Aug 31, 2018

Submitted by CA Shashi Mohan on Mon, 07/23/2018 - 12:27pm.

‘Ease of Doing Business’ may be on most priority list of the Indian Government, the administration bodies, however keep inventing new tools to challenge the process.  Mandatory Annual KYC of all Directors of all companies may be considered as one of such tool, which needs to be complied with on or before August 31, 2018. Non-compliance will result in de-activation of DIN and consequently such Directors will not be able to function as ‘Director’.

Every private limited company in India requires minimum 2 Directors and out of them at least 1 Directors must be a Resident in India (has stayed min. of 180 days in last Calendar year). As a general practice, where ever 2 Directors are Foreign Nationals or Non- Resident in India, a 3rd Director, who is ‘Resident in India’ needs to be appointed. In a Public Limited Company, there are minimum 3 Directors.

MCA is validating data of all Directors in all companies identify inactive directors, ghost directors, directors who are in default and also update the ‘KYC’ of all Directors, with latest documents of Identification, address, email IDs, Phone Numbers etc

As every document at MCA need to be digitally signed and uploaded electronically, hence a  check need to be carried out about readiness of these documents to meet the compliance due dates and avoid late fee & other consequences.

Who needs to comply?

Every Director (Resident or Non-Resident) in an Indian Company, who has been allotted DIN on or before 31st March, 2018 

What’s required to be done?

  1. Indian Nationals Directors will required Digital Signature, which is PAN based. In earlier days DSC used to be prepared even without PAN.
  2. Foreign Nationals/Foreign Residents Directors’ will require that their name as mentioned in Digital Signature application form, is exactly matched with his/her name in DIR-3 KYC form. Getting a PAN is not necessary however Passport is a mandatory document.
  3. Get the corrections done in the DSC as per above requirements, well in advance.
  4. Be ready with Unique Personal Mobile Number and Personal Email ID. Any other persons/other employees/any representatives Mobile Number or Email ID are not allowed.

Can Directors do it themselves?

  1. DIR-3 KYC form also need to be approved by any practicing professional (Chartered Accountant, Company Secretary etc before uploading/filing
  2. DSC of the practicing professional (Chartered Accountant, Company Secretary etc to be arranged.

What about non-compliance?

  1. MCA21 system of Ministry of Corporate Affairs, India will mark such DINs as ‘Deactivated’
  2. Filing of the eForm DIR-3 KYC after August 31, 2018 or in respect of such deactivated DINs shall be allowed only upon payment a specified fee of INR 5,000.

How to get DSC?

  1. DSC is a digital form of signature which are issued by Licensed Certifying Agencies under Ministry of Information Technology, India and it’s stored in a physical USB/Dongal.  There are plenty of vendors who are authorised by the Licensed Certifying Authorities to prepare DSC.
  2. A simple form, signed by the applicant is required to be submitted along with ‘Self Attested’ address & Identification proof to the DSC vendor
  3. DSC is prepared for a validity of 1 or 2 years and once it gets expired, it needs to be prepared again. On availability of required documents, it may take 2-4 working days to prepare a new DSC. Hence one needs to keep a track on the expiry date of DSC.
  4. In case of Foreign Nationals/Foreign residents, Notorised/Appostiled documents of Address Proof (bank Certificate, Utility Bills) and Identity Proof (Passport, Country Identification card, Bank Certificate etc) required. In case of several countries getting the required documents Translated in English, Notorisation, Apostilation and making them available in India may take 1-3 weeks time.
  1. Starting July 2018, a short Video Clip of the applicant also needs to be captured & uploaded as a part of process to prepare a DSC. 

Source

Please click on the link below for more information

http://www.mca.gov.in/Ministry/pdf/CompaniesAppointmentQualificationRules_06072018.pdf

Glossary

KYC: Know Your Customer

DIN: Director Identification Number

DSC: Digital Signature

PAN: Permanent Account Number

MCA: Ministry of Corporate Affairs

MCA21: e-Governance initiative of MCA

About the Author

With over 15 years of experience, Shashi Mohan has been instrumental in formulating strategy for Entry India, Business Set-up and Operational Management of over 150 overseas brands from USA, Europe, GCC and South East Asian countries in India. He is a member of our ‘Expert Panel’ at Entry India. Shashi can be reached at shashi.m@excelorindia.com or +91 9818 700 482

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