– Dakshita Mehta

India’s Ministry of Corporate Affairs (MCA) is having a busy year. After cracking down on shell companies and LLPs, they have now introduced more stringent KYC norms for directors and designated partners of LLPs in India. The new E-Form DIR-3 KYC is meant to be filed annually and is meant to track the identity of directors in Indian companies and LLPs. The idea behind this could be to have greater transparency and accountability for directors as well as to put measures into place to deal with non-compliance even in the future.

Below we have set out the salient features of this new disclosure requirement in a Q&A format.

What is the disclosure requirement? Whom does it apply to and from when?

• Purpose of the rules: To update KYC of all persons having a Director Identification Number (DIN) irrespective of whether such person currently holds any directorship or not. It is pertinent to note here that disqualified directors are also required to file this form.
• The effective date of the Notification: 10 July 2018
• Mandated date for compliance: 31 Aug 2018 for any directors who had a DIN prior to 31 March 2018. For others (i.e. people who have obtained DINs after 1 April 2018) the due date is 30 April of the immediate next financial year. [The Indian financial year runs from 1 April to 31 March].
• Applicability: All persons who hold a DIN, whether Indian Resident / non-resident Indian / Foreign National are required to file E-Form DIR-3.

Who is impacted?

Any individual, who is a partner/designated partner in a Limited Liability Partnership (LLP) or who is a Director of a company, holding a valid DIN allotted on or before 31st March 2018.

For those who have received their DIN after 1 April 2018, the rule is applicable however the deadline for filing is 30 April 2019.

The compliance dates are the same for resident and overseas directors.

What is DIR-3 KYC and what are the contents of the form?

The Know Your Client (“KYC”) form is a standard form used by banks and investment firms, however the term “KYC” has slowly expanded into multiple areas unrelated to banking. Generally the purpose of a KYC form is for the recipient (bank, investment firm, government, etc.) to know key information about their clients such as unique identifiers, communication addresses, risk tolerance, financial position, etc.

In the same manner, MCA’s DIR-3 KYC form requires certain details about any person holding a DIN. As per form DIR-3 KYC notified by MCA, the details that need to be provided include:

• Director Identification Number (DIN)
• Full Name
• Father’s Name
• Other basic details like citizenship details (whether a citizen of India or not), nationality, date of birth, gender.
• Personal mobile number and personal email address (mandatory)

The form must be signed by the individual using their valid Digital Signature Certificate (DSC).  

The following documents need to be attached:

• A self-attested copy of Income Tax Permanent Account Number or PAN (which is verified with the Income Tax website) (mandatory for Indian nationals)
• Aadhar card (mandatory for Indian nationals)
• Passport: apostilled copy is mandatory for foreign nationals, and a self-attested copy is optional for Indian nationals
• Permanent residential address: proof is to be self-attested for Indian nationals and should be apostilled for foreign nationals
• Present residential address if it is different from permanent residential address
• Voter Identity Card Number (optional)
• Driving License (optional)

What are the consequences of non-compliance?

In case a director fails to provide his details in E-Form DIR-3 KYC within the stipulated time, the director’s DIN will be deactivated and the MCA21 system will mark all approved DINs (allotted on or before 31 March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’. The deactivated DIN shall be reactivated only after filing of E-form DIR-3 KYC along with prescribed fees as prescribed under Companies (Registration Offices and Fees) Rules, 2014. The late filing penalty is Rs. 5,000 from 1 September, 2018.

More importantly, while a DIN remains inactive, the director/partner will be unable to sign any compliance documents on behalf of any company/LLP. As most companies in India finalise their accounts and taxes in September, this could create substantial difficulties and non-compliances for companies whose directors have not submitted the DIR-3 KYC.

Are there any special considerations for overseas directors?

For all foreign nationals who have a DIN, their passport number is to be mentioned in the form compulsorily. Passport details are not compulsory for Indian residents but they must provide them if they have a passport.

In case of foreign nationals, the supporting documents also need to be attested by the authority prescribed. These documents are:

• Copy of Passport
• Copy of proof of residence with the individual’s name on it (any 1 out of: Bank Statement/ Electricity bill/ Telephone bill/ Mobile bill, not older than 1 year).

These supporting documents should be attested by the Consulate of the Indian Embassy or a foreign public notary.

What if the documents are not in English or Hindi?

In case of proofs which are in languages other than Hindi / English, the proofs should be translated into English or by a professional translator carrying his details (name, signature, address) and seal.

In the case of foreign nationals, translation done by a notary of home country is also acceptable.

Any other requirements?

The director’s name in the form, in the DSC and on their PAN card needs to match. If not, the documents will need to be modified.

Mobile number and email address need to be the director’s personal ones only, i.e. a generic office email / number cannot be used.

The form must be certified by a practising professional, i.e. a Chartered Accountant, Cost Accountant or Company Secretary in whole-time practice.

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The notification published by the MCA can be found here: Companies (Appointment and Qualification of Directors) 4th Amendment Rules, 2018

Related topics: Foreign companies entering India – what structure is right for you? Startup Style – What legal format fits you best? India Strategy

To know more about the requirements of filing the E-Form DIR-3 KYC, please write to us at info@asitmehtaassociates.com