KYC non-compliance: Govt deactivates ID numbers of 2.1 million directors

The government has started the process of de-activating the identification numbers of nearly 2.1 million directors of companies as they failed to comply with KYC norms, according to a senior official.

The Director Identification Numbers (DINs) -- a unique number allotted to individuals who are eligible to have directorship on the boards of registered companies -- are being de-activated. They will be re-activated after a fee payment of Rs 5,000 along with the requisite form and the individuals concerned might also face action.

The latest move by the Corporate Affairs Ministry also comes at a time when the government has intensified the crack down on shell companies, which are suspected to be conduits for illicit fund flows.

In June, the ministry decided to carry out KYC (Know Your Customer) process for all directors, including those who have been disqualified. The last date for complying with the new norms by way of submitting form 'DIR-3 KYC' without fee ended on September 15.

The senior ministry official said that out of 3.3 million active directors, only around 1.21 million directors completed the KYC process. The balance of around 2.1 million individuals failed to comply with the requirement.

"The process of deactivating the non-compliant DINs is in progress and is likely to be completed by September 17, 2018," the ministry said in a communication on its website.

After the deadline of September 15, the MCA 21 system would mark all approved DINs -- allotted on or before March 31 this year -- against which DIR-3 KYC form has not been filed as "de-activated". The reason for de-activation would be 'non-filing of DIR-3 KYC', as per the ministry.

MCA 21 is used by stakeholders to submit requisite filings to the ministry.

According to another communication by the ministry, which is implementing the Companies Act, the form may be filed "in respect of such de-activated DINs only with a fee of Rs 5,000, without prejudice to any other action that may be taken".

Last year, the ministry had disqualified more than 300,000 persons from holding directorship at registered companies amid the fight against illicit fund flows. These individuals were directors at firms that were not carrying out business activities for a long time.