From Chaos to Clarity: How DIR3 KYC Transforms Director Identification

➣ Introduction:

The Companies Act, 2013 has brought about significant changes in the corporate governance landscape of India, emphasizing the need for transparent and accurate identification of Directors. To streamline the Director Identification Process, the Ministry of Corporate Affairs (MCA) introduced the e-Form DIR-3. This form allows individuals to obtain a unique Director Identification Number (DIN), a prerequisite for any individual intending to become a Director in an Indian company. In this digitalized era, filing an application in e-Form DIR-3 was a one-time process for any individual to obtain a DIN, streamlining and simplifying the procedure. Also Read: All You Need to Know About Director Identification Number (DIN) & DIR-3 KYC and Can a Person Hold Multiple Director Identification Numbers (DIN)?

However, with the increasing number of Directors and the dynamic nature of corporate structures, maintaining current and accurate information became challenging. To address this, the MCA introduced the e-Form DIR-3KYC (Know Your Customer) as a mandatory Annual Compliance Requirement. This ensures that the details of all the Directors are up-to-date and allows for prompt updates in case of any changes.

In addition to this, the e-Form DIR-3KYC (Web) was introduced for cases where there are no changes in the details of the Director after the initial filing of e-Form DIR-3KYC upon obtaining the DIN.

The implementation of the e-Form DIR-3KYC aims to enhance the transparency and reliability of corporate governance by minimizing the risks of identity theft and fraudulent Directorships. By requiring Directors to annually validate their details through the DIR-3KYC process, the MCA has transformed the Director Identification System from a chaotic and fragmented process into a clear and organized framework.

➣ Objectives of DIR3 KYC:

The e-Form DIR-3KYC plays a crucial role in safeguarding the interests of the stakeholders and maintaining the credibility of the corporate sector. It ensures transparency and accountability in Director Identification and Compliance Processes, thereby promoting corporate governance.

The form aims to –

√ Verify Director Details: Ensure that the information provided by the Directors, such as personal details, DIN, and contact information, is accurate and up-to-date.

√ Prevent Identity Fraud: Mitigate the risks associated with fraudulent activities by verifying the identity of Directors through a rigorous KYC process.

√ Enhance Corporate Governance: Facilitate better corporate governance practices by ensuring that only genuine and eligible individuals shall hold Directorship positions in companies.

√ Compliance with Regulatory Requirements: Fulfill the statutory requirement under the Companies Act, 2013, which mandates Directors to provide their KYC details annually.

√ Maintain Data Integrity: Strengthen the integrity of the MCA registry by regularly updating and validating the Director’s information.

➣ The e-Form DIR-3KYC:

The e-Form DIR-3KYC is required to be filed by the Directors annually, and it is more of a comprehensive KYC procedure, required to be filed when there are changes in the details of the Director such as personal information (like address, contact details), KYC documents (like PAN card, Aadhar card), or any other pertinent information related to their Directorship.

Here are the key timelines and scenarios when the e-Form DIR-3KYC needs to be filed:

1. Newly Appointed Directors who have been allotted a DIN after 31st March of a financial year must file e-Form DIR-3KYC within 30 days from the date of allotment of DIN.

2. Existing Directors who have been allotted a DIN on or before 31st March of a financial year must file e-Form DIR-3KYC annually.

3. There have been any changes in the details of the Director since last filing as mentioned above.

The e-Form DIR-3KYC requires detailed information about the Director, including self-attested proof of identity and proof of address. These documents must then be certified by a Practicing Professional, such as a Chartered Accountant, Company Secretary, or Cost and Management Accountant. The Director has to use his/her own Digital Signature Certificate(DSC) while filing this e-Form This process ensures compliance with regulatory standards and promotes transparency in corporate governance.

➣ The e-Form DIR-3KYC(Web):

The DIR-3KYC(Web) service offers a simplified and efficient alternative to the traditional KYC process for the Directors. This service simplifies annual compliance for Directors by reducing paperwork and administrative burden while ensuring that their information remains up-to-date in the MCA’s records. Directors can use this web-based service to verify their details stored in the MCA’s database. This is done through a straightforward online verification process.

After filing the initial e- Form DIR-3KYC, Directors can utilize this web service for subsequent years, provided there have been no changes in their details since the last filing. This web service operates under the assumption that the Director’s information has remain unchanged. Therefore, Directors only need to verify their existing details using an OTP (One Time Password) sent to their registered mobile number and email ID. This process eliminates the need for uploading and verifying additional documents every year.

➣ Requirements of e-Form DIR3KYC:

The required details for e-Form DIR3KYC includes:

√ ( Personal information – (Director’s full name, Father’s name, Date of Birth, and personal identification details like PAN & Aadhar (for Indian nationals) or Passport (for foreign nationals).

√ ( Other Mandatory Details – (Email id, phone number, Address, details of their Nationality and Citizenship)

√ ( Self-attested Documents –

• Proof of Identity – PAN Card, Aadhar Card, Passport
• Proof of Address – Utility Bill (not more than 2months old), Bank Statement, Rental Agreement

√ Others –

• Personal mobile number and email ID, which will be verified through OTP.
• DSC of the Director filing the Form.
• For Certification purpose – DSC of a Professional in Practice (Chartered Accountant/Company Secretary/Cost & Management Accountant) along with their Membership Number (M. No.) and Certificate of Practice number (COP).

➣ Due Date for filing the DIR-3 KYC Form and DIR-3:

E-form	Purpose of filing	Timeline	Due date	Remark
DIR-3 KYC Form	KYC of Directors	Annual Compliance	30th September	As on March 31, of the financial year, every individual with a DIN who has not previously filed e-Form DIR-3KYC or has had any changes in their details provided are required to file this e-Form.
DIR-3	KYC of Directors	Annual Compliance	30th September	Every individual who has previously submitted the e-Form DIR-3KYC and have no changes in their details are required to file this e-Form.

➣ Consequences of Non- Compliance with e-Form DIR-3KYC Provisions:

Timely compliance with e-Form DIR-3KYC is crucial for Directors to maintain their active status and legal authority within the company. Non-compliance not only leads to financial penalties but also disrupts business continuity and governance processes. This non­compliance can have significant consequences on the Directors.

Here’s a breakdown of the potential impacts on the Directors:

√ Deactivation of DIN: Failure to file the e-Form within the stipulated time can lead to the deactivation of DIN of the Director. A deactivated DIN means the Director loses his status as a valid Director recognized by the Ministry of Corporate Affairs (MCA).

√ Impact on Director’s Authority: With a deactivated DIN, the Director cannot legally sign any documents on behalf of the company. This includes important contracts, financial statements, or any other documents requiring a Director’s signature.

√ Reactivation Process: To reactivate a deactivated DIN, the Director must provide the required KYC information through filing the e-Form DIR-3KYC. Additionally, a penalty of Rs 5000 is imposed on the Director.

√ Administrative Challenges: Reactivating a DIN involves administrative hurdles and delays, potentially affecting the company’s operations and governance structure.

➣ Procedure to file e-Form DIR3KYC –

Filing e-Form DIR-3KYC involves several steps on the MCA portal. This filing can be done by the Director itself or by the Company/Professional on their behalf. Below is a step-by-step guide to assist you through the process:

Step 1: Prepare Required Information:

Before starting the filing process, gather the following information and documents:

• • Director Identification Number (DIN): Ensure that the DIN is available.
  • Personal Details: Name, Date of Birth, Father’s name, Nationality, etc.
  • Contact Details: Current address, phone number, and email address.
  • Identity and Address Proof: Self-attested copies of Aadhar card, PAN card, passport, etc.
  • Digital Signature Certificate (DSC): Ensure that the DSC of the Director and Professional is valid and accessible.

Step 2: Access MCA Portal

• • Visit MCA Portal: Go to the Ministry of Corporate Affairs (MCA) website at mca.gov.in.
  • Login: Use your credentials to login to the MCA portal by clicking on “My Application” followed by validating the captcha and then “Login for V3 Filing”. If one does not have an account then they need to “Register” them self first.

Step 3: Locate DIR -3KYC From

• • Navigate to e-Filing Section: Once logged in, follow the mentioned steps –

√ Start by clicking on the “MCA-Services” tab

√ From the drop down select the option of “Company e-Filing”

√From the drop down select the option of “DIN Related Filing”

√ Finally the e-Forms DIR-3KYC & DIR-3KYC(Web) are available.

Step 4: Following are the steps to deal with the concerned e-Forms

1. In case of e-Form DIR-3KYC: Fill the Form:

• • • Select Form DIR-3KYC: Choose the option to file DIR-3KYC.

• • • Fill Details: Enter all the required details accurately in the form online. This includes personal information, contact details, and upload necessary documents as per the instructions provided therein.

• • • Verify Details: Double-check all the entered information for accuracy.
    • Digital Signature: Use the DSC of the Director to sign the form. 2. Use the DSC of the Professional to certify the form.

• • • Review and Submit the Form: Review the filed form and attached documents and on being satisfied submit the Form electronically on the portal.
    • SRN: SRN for the said form will be generated on submitting the e-Form.

• • • Payment: There is no payment if the form is being filed within the due date. If that’s not the case, then a penalty amount of Rs. 5000 will be applicable in the said e-Form.

2. In case of e-Form DIR-3KYC(Web): Verify the details in the Form:

• • • Select Form DIR-3KYC: Choose the option to file DIR-3KYC(Web).
    • Enter DIN: Start by entering your Director Identification Number (DIN) and click on ‘Submit’.

• • • Verification through OTP: There are two steps in this case:

√ Mobile Number Verification: An OTP (One-Time Password) will be sent to your registered mobile number. Enter the OTP to verify your mobile number.

√ Email Verification: Similarly, an OTP will be sent to your registered email address. Enter the OTP to verify your email address.

• • • Pre filled details & documents: Pre filled details of the Director will appear on the screen. Review and verify the details by going through it carefully.

• • • Review and Submit the Form: Review the filed form and attached documents and on being satisfied submit the Form electronically on the portal.
    • SRN: SRN for the said form will be generated on submitting the e-Form.
    • Payment: There is no payment in this case.

Step 5: Acknowledgement

• • Download Receipt: Download and save the acknowledgement receipt.

➣ FAQs on filing of with e-Form DIR-3KYC:

1. What section and rules specify this e-Form?

Rule 12A of Companies (Appointment and Qualifications of Directors) Rules, 2014 specifies Directors’ KYC.

2. What is e- Form DIR-3KYC?

DIR-3KYC is a mandatory compliance e-Form introduced by the Ministry of Corporate Affairs (MCA) in India to verify and update the personal and contact details of Directors holding a Director Identification Number (DIN).

3. Who needs to file e- Form DIR-3KYC?

All individuals who have been allotted a DIN on or before 31st March of each financial year must file e- Form DIR-3KYC annually.

4. When is the e-Form DIR-3KYC due?

The e- Form DIR-3KYC must be filed by 30th September of each financial year. For Directors who received their DIN after 31st March, the form must be filed within 30 days from the date of allotment.

5. What happens if I fail to file the e- Form DIR-3KYC?

Failure to file the e-Form DIR-3KYC within the stipulated time can result in the following –

➣Deactivation of your DIN,

➣Penalties,

➣Inability to undertake new appointments or changes in existing Directorships

6. How can I reactivate my DIN if it has been deactivated?

To reactivate a deactivated DIN, you need to file the e-Form DIR-3KYC with the reactivation fee as prescribed by the MCA. Upon successful submission and payment of the late fee, the DIN will be reactivated.

7. What if I don’t have a Digital Signature Certificate (DSC)?

A valid DSC is required to electronically sign and submit the e-Form DIR-3KYC with the MCA portal. In other words, one cannot proceed without a valid DSC.

8. How do I update my contact details if they have changed?

You can update your contact details by filing the e-Form DIR-

9. Is there a fee for filing e- Form DIR-3KYC?

There is no such fees applicable for filing the e-Form DIR-3KYC/ DIR-3KYC(Web), if the filing is done within the due date. However, in case of non-compliance, a penalty is applicable on the form.

10. Can I file e- Form DIR-3KYC for multiple DINs?

Directors should not hold multiple DINs. If a Director have multiple DINs, then they must apply for the surrender or deactivation of the duplicate DINs before filing e- Form DIR-3KYC.

11. What is the last date of filing e- Form DIR-3KYC & web – form DIR-3KYC(Web)?

The last date for filing e- Form DIR-3KYC is on or before the 30^th of September of the immediate financial year.

12. What is WEB Form DIR-3KYC(Web)?

Every individual who already submitted the e-form DIR-3KYC shall file the e-form DIR-3KYC(Web) in the subsequent years only if there are no changes in the details of the Director.

13. Do we have ‘pay later option’ for filing e-form DIR-3 KYC or web form DIR-3KYC Web post due date?

No, there are no pay later available in both cases. Payment has to be made immediately once the SRN (Service Request Number) is generated.

14. Should the documents be self-attested by the Directors and as well as the professionals?

The documents attached with the e-Form shall be self-attested followed by the certification done by a Practicing professional who is a Chartered Accountant, Company Secretary or Cost Accountant, in whole-time practice.

➣ Common challenges faced while filing e-Form DIR-3KYC:

1. Technical Issues on MCA Portal

Challenges:

➣ Website Downtime: The MCA portal may be down or slow, especially near filing deadlines.

➣ Browser Compatibility: Certain browsers may not support the portal functionalities properly.

Solutions:

➣ Check Browser Compatibility: Use recommended browsers of the latest versions of Google Chrome and Mozilla Firefox.

➣ Clear Cache and Cookies: Regularly clear your browser’s cache and cookies to ensure smooth functioning.

➣ Try Off-Peak Hours: Access the portal during off-peak hours to avoid server overload issues

2. Problems with Digital Signature Certificate (DSC)

Challenges:

➣ DSC Not Recognized: The portal may not recognize the DSC due to technical issues.

➣ Expired DSC: Using an expired DSC will lead to filing failures.

Solutions:

➣ Install DSC Properly: Ensure the DSC is properly Installed and Registered on your system. (Follow MCA guidelines for DSC setup.)

➣ Check Validity: Check the validity of your DSC before filing and renew it if necessary.

3. Incorrect or Incomplete Information

Challenges:

➣ Data Mismatch: Mismatched personal details with records held by MCA.

➣ Incomplete Information: Missing mandatory information or documents.

Solutions:

➣ Double-Check Information: Cross verify all the personal details and documents attached to the form before submission.

➣ Ensure Completeness: Fill in all the mandatory fields and upload all the required documents.

4. OTP Verification Issues

Challenges:

➣ Delayed OTP: Delay in receiving the OTP on the registered mobile number or email.

➣ OTP Expiry: OTP expiring before it can be entered.

Solutions:

➣ Resend OTP: Use the ‘Resend OTP’ option if there is a delay. The OTP stays valid for about 30mins.

➣ Check Network: Ensure you have a stable network connection to receive OTPs promptly.

5. Document Upload Errors

Challenges:

➣ File Size and Format Issues: Documents not uploading due to size or format restrictions.

➣ Unreadable Scans: Poor quality of scanned documents leading to rejection.

Solutions:

➣ Follow Guidelines: Adhering to the prescribed file size and format

• • File should be PDF
  • Size should not exceed 10MB

➣ Clear Scans: Ensure documents are clearly scanned and legible for reading.

6. Missed Deadlines

Challenges:

➣ Unawareness of Deadlines: Directors may miss filing deadlines due to lack of awareness.

➣ Procrastination: Delaying the filing process until the last minute.

Solutions:

➣ Set Reminders: Set calendar reminders in advance to not miss the deadline.

➣ Early Filing: Start the filing process early to avoid last-minute issues.

7. Multiple DINs

Challenges:

➣ Duplicate DINs: Directors who are having multiple DINs.

Solutions:

➣ Merge DINs: Apply for the surrender or deactivation of duplicate DINs before filing e-Form DIR-3KYC.

➣ Verify DIN: Ensure that only one active DIN is used for filing the form.

Conclusion-

In this era where corporate governance and transparency are paramount, the e- Form DIR-3KYC initiative by the Ministry of Corporate Affairs (MCA) serves as a vital tool for maintaining the integrity of Director Information. By mandating annual verification and updating of personal and contact details of Directors, the DIR-3KYC process helps prevent identity fraud, ensures compliance with the Companies Act, 2013, and strengthens the overall framework of corporate governance in India.

Directors must recognize the importance of this compliance requirement and proactively complete their KYC filings to avoid penalties, deactivation of their Director Identification Number (DIN), and other legal consequences. With the step-by-step guide provided, Directors can navigate the DIR-3KYC filing process with ease, ensuring all necessary information and documents are accurately submitted within the stipulated deadlines. Directors are encouraged to take advantage of the resources and extend their support to ensure seamless adherence to these important regulations.

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Author: CS Hansraj Jaria is a Practicing Company Secretary, Insolvency Professional and Registered Valuer SFA.

Disclaimer: All information provided herein is for informational and educational purposes only and should not be relied upon as professional advice or specialized expertise. While every care has been taken in the preparation of this write-up to ensure its accuracy. The author disclaims any liability for any loss or damage, directly or indirectly, resulting from reliance on the information presented herein.