KYC norms: 1.8 million directors struck off MCA rolls, DINs deactivated

The government has struck 1.8 million directors off the rolls because they failed to comply with know-your-customer (KYC) norms. This means that the director identification numbers (DINs) of these directors have been deactivated. The directors, however, can pay the government a fine and update their KYCs to get their DINs reactivated. Having on board a director with a reactivated DIN will not affect the functioning of a company. 

However, this may preclude any further lapse and the board of directors of all companies will be forced to take compliance seriously.

The remaining directors of the total of 3.2 million have updated their KYC forms. 

The Ministry of Corporate Affairs (MCA) had given 60 days till September 15 for directors to comply with KYC norms. But till then, 2.1 million directors had not done so. However, directors cried foul over the process. The ministry received complaints that these directors could not complete complying with the norms because the ministry’s portal — MCA21 — did not work.

There were representations to the Corporate Affairs Ministry Secretary Injeti Srinivas on the issue. Some included emails from Kerala, where directors sought an extension owing to problems related to the floods.

On September 18, the MCA had extended the date to October 3 for completing KYC.

This means only 300,000 directors had completed their verification during the extension given. In order to update their KYC, directors could use their Aadhaar number, driving licence, and passport. The MCA had started this drive to weed out dummy directors and duplication, and ensure that these directors did not flee the country when accused of wrongdoing.

The government’s move on KYC started as a step to check the proliferation of shell companies and keep a tab on unscrupulous elements on the board. 

The MCA announced a fresh KYC process in July for verifying the credentials of DIN holders.

BOARDROOM CLEANUP

• 1.8 million directors face axe for not updating KYC
• There were around 3.2 million directors in the country
• Ministry of Corporate Affairs (MCA) wanted to weed out dummy directors by asking all directors to update KYC
• MCA move to also help nab shell companies