KYC updation for all directors of all companies

Raju Patro

We all are familiar with the term “KYC” Know your customer (alternatively know your client or ‘KYC’). KYC, is the process of knowing your customer by identifying and verifying the identity by using documents, data or information.

KYC is a popular term used in the banking and financial field, However it is a regulatory and legal requirement.

Regulatory: In terms of the guidelines issued by the Reserve Bank of India (RBI) on 29th November 2004 on Know Your Customer [KYC] Standards – Anti Money Laundering [AML] Measures, all banks are required to put in place a comprehensive policy framework covering KYC Standards and AML Measures.

Legal: The Prevention of Money Laundering Act, 2002 (PMLA) also requires Banks, Financial Institutions and Intermediaries to ensure that they follow certain minimum standards of KYC and AML as laid down in the Act and the “rules” framed there under.

The Ministry of Corporate Affairs (MCA) introduced the KYC norms for all directors of all Companies. To implement this, MCA has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 effective from 10^th July, 2018. In this write up we discussed about the various practical aspects of the Companies (Appointment and Qualification of Directors) fourth amendment Rules, 2018:

1. Applicability of the Rules:

Rule 12A use the word “allotted”, Hence this rule applicable to every individual allotted Director Identification Number (DIN) irrespective of whether he/ she hold any office of directors not.

2. Disqualified Directors:

Disqualification occurred when an individual having DIN and appointed in a Company as a Director, it implied already having DIN “allotted”, so disqualified directors also submit KYC Form.

However clause (iii) of verification head of form DIR-3_KYC state as under:

iii) I am not restrained, disqualified, remove of, for being appointed as director of a company under the provisions of the Companies Act, 2013 including Section 164 and 169:

Therefore, applicant should attach with form DIR-3_KYC separate addendum about his/her Disqualification and practicing professional shall note the same.

3. Nature of compliance:

It is recurring nature compliance to be file every year means add one more form in our year ended compliance checklist.

4. Cut-off date :

31^st March of every financial year, if an individual having DIN as on 31^st March of a financial year shall mandatorily file form DIR-3_ KYC.

5. Due date of compliance:

Filing shall be completed within 30 days from the end of financial year i.e. on or before 30^th April of the Financial Year.

6. Financial Year 2017-18:

Every individual who has already been allotted DIN as at March 31, 2018 shall submit e-form DIR-3 KYC on or before 31st August, 2018. Therefore the due date, who has been allotted DIN from 1^st April, 2018 to 9^th July, 2018 shall submit e-form DIR-3 KYC on or before 30^th April of the next Financial Year i.e. 30.04.2019.

7. I am only Designated Partner of LLP:

The Ministry, vide notification dated 5th July, 2011, has integrated the Director’s Identification Number (DIN) issued under Companies Act, 1956 with Designated Partnership Identification Number (DPIN) issued under Limited Liability Partnership (LLP) Act, 2008 with effect from 9.7.2011:

Pursuant to this notification:

(a) With effect from 9.7.2011, no fresh DPIN will be issued. Any person, who desires to become a designated partner in a Limited Liability Partnership, has to obtain DIN by filing e-form DIN-1:

(b) If a person has been allotted DIN, the said DIN shall also be used as DPIN for all purposes under Limited Liability Partnership Act, 2008:

Reference also be drawn under verification column (v) of form DIR-3_KYC, Form DIR-3 which Is Application for allotment of Director Identification Number before appointment in an existing company or LLP.

Therefore an individual having DPIN also required to file for DIR-_KYC.

8. Filing of Form DIR-6 for change in particulars of Director:

If any DIN holder wish to change/update the particulars e.g. name, Date of Birth, Address etc.

By filing Form DIR-3_KYC, it shall be done, however later on changes shall be made by filing DIR-6 only.

9. What are the KYC documents:

From 10th July, 2018 it’s a mandatory for every individual having allotted DIN as at 31st March, 2018 shall adhere to KYC norms. The acceptable document as under:

Resident Individual

For Identification

a. Copy of PAN

b. Copy of Aadhaar

For verification

a. Mobile Number & e-mail ID

Other than Resident Individual e.g. Foreign Directors

a. Copy of Passport for identification and Mobile Number & e-mail ID for verification.

10. Signature Verification:

The KYC to be completed by physical signature in all the above KYC documents and because

Form DIR-3_KYC submit online so e-form DIR-3_KYC digitally signed by the applicant and

Practicing professionals as well.

11. FEE FOR FILING e- Form DIR-3 KYC²:

i) Fee payable till the 30th April of every financial year in respect of e-form DIR-3 KYC as at the 31st March of immediate previous year.	—-
ii) Fee payable (in delayed case)	Rs.5000

Note: For the current financial (2018-2019), no fee shall be chargeable till, the 31st August, 2018 and fee of Rs.5000 shall be payable on or after the 1st September, 2018.

12. Conclusion:

Like every institution the Ministry also wants to know its customer by identifying and verifying the identity of the DIN holders as well as update the database of the ministry.

Disclaimer:

The entire content of this write up have been prepared on the basis of relevant provisions and as per the information available at the time of preparation. It is not intended to be a professional advice at all. It is suggested that before making any decision do consult any professional/advisor.