Application of KYC of Directors [Form DIR-3 KYC]

Introduction:

KYC is an abbreviation for ‘Know Your Customer’, this form is a part of the process of identification carried out by banks, insurance companies and other financial institutions before getting into business with people. This process involves the submission of various personal identification documents like PAN/Aadhar along with address proofs and their subsequent verification by the concerned authorities.

Contents of a KYC Form

Identity Proofs

• UID short for Unique Identification numbers such as the one mentioned on one’s Aadhar/PAN cards or on passports or voter ID cards.
• Identity card document along with the photograph of the applicant signed and issued by a Statutory or regulatory legal authority.
• An identification card is issued by banks, cooperative enterprises, or financial institutions where all the above are publicly owned.
• Identification Cards issued by colleges or other professional educational institutes affiliated to bodies like ICFAI, Bar Council of India etc.

Address Proofs

• Passports, Voter IDs, PAN cards, Ration Cards and Driving Licenses, other documents like a lease of owned flats.
• Utility bills like telephone bills or gas bills.
• Bank Account Statements
• Self-Declaration by members of Governmental institutions like judges of Supreme Courts, ministers, and other officials
• Proof of residence by institutions like Governmental, regulatory, or statutory bodies like a notary public, commercial banks, insurance companies etc.

Types of KYC

• Aadhar-based KYC – Online
• Offline KYC or IPV- In-Person Verification.

FORM [DIR – 3] KYC

DIR-3 KYC form was launched by the Ministry of Corporate Affairs (MCA) pursuant to  Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014,  which says every individual who is allotted a Director Identification Number – DIN within the 31^st of March of a financial year, must within 30^th September of the next financial year submit his/her KYC.

Direct Identification Number (DIN)

The DIN is a unique identification member allotted to an individual who is either a director of a company or in the process of becoming one, the concept of DIN was introduced pursuant to sections 266a to 226g which underlined the various provisions and punishments involved in case of damages to a firm in case of delinquency of directors.

Document Required for KYC

• Proof of residence or address such as rental agreements, utility bills, Aadhar card etc.
• Details of nationality
• Details of citizenship like gender, date of birth etc.
• Permanent Account Number (PAN)
• Passport (Mandatory in case of foreign nationals)
• Driving license
• Aadhar Card
• Personal details like phone number and Email Address
• Voter ID proof
• Digital signature of the applicant.

The above documents must be attested by a competent Cost Accountant and a declaration of the same must be provided by the applicant. No governmental fee/cost is involved in the filing of the DIR-3 KYC form.

Step by Step Guide to Fill a DIR-3 KYC Form

1. Download the e-form from the Ministry of Corporate Affairs website.
2. Fill in the DIN details, DIN must have its status ‘approved’. Applicants with deactivated DIN may fill the form later after the payment of fine imposed due to late filing has been made.
3. Filling of relevant details in the DIR-3 KYC form: –
   • Name and other relevant information, it must be noted that the name used must match the one in the PAN card.
   • Declaration of nationality
   • Declaration of age – one must be a minimum of 18 years of age to fill this form
   • Address – These details must match the proof address attached with the form.
4. PAN verification
   • PAN verification – for successful validation PAN in the form must match the PAN in the DSC, DSC is an abbreviation for Digital Signature Certificate issued by the Certifying Authority of India. For pan verification either a Class II or III certificate is mandatory.
5. Updating contact details and OTP verification
   • Contact details must be updated using the applicant/director’s mobile number and email address, where an OTP (One Time Password) shall be received for verification. Separate OTPs will be sent to the phone number and email address.
6. Authentication of the e-form
   • This involves the form being signed digitally by a competent cost accountant, chartered accountant, or company secretary.
7. Generation of SRN
   • After submission of the e-form, SRN (Service Request Number) is generated and allotted to the applicant/director for use in further communication with the Ministry of Corporate Affairs (MCA).
8. Email communication
   • The applicant/director receives an email with the receipt of his from representing the successful submission of the form.

The DIR-3 KYC form has been introduced pursuant to section 266 of the Companies Act the above section stresses the need for such an identification and verification process through the DIR-e KYC form. This section contains the legal provisions to be followed in the case of: –

• Has misapplied or retained, or become liable or accountable for, any money or property of the sick company
• Has been guilty of any misfeasance, malfeasance, non-feasance or breach of trust in relation to the sick company[1]

Laws Governing Filing of the E-Form

Rule 11(2)of The Companies (Appointment and Qualification of Directors) Rules, 2014[2]

The Central Government or the Regional Director or any officer authorized by them is vested with the power to deactivate the DIN Director Identification Number of an applicant/director if he/she does not submit his particulars in the e-form DIR-3 KYC within the designated time period pursuant to rule 12A of the Companies Act 2014.

Rule 11(3)of the Companies (Appointment and Qualification Of Directors) Rules, 2014[3]

The deactivated DIN Director Identification can only be reactivated only if the e-form DIR-3 KYC is submitted along with the prescribed fees in accordance with Companies (Registration Offices and Fees) Rules, 2014[4]

Rule 12 A of the Companies(Appointment and Qualification Of Directors) Rules, 2014[5]

Any individual who has been allotted a DIN Director Identification Number on March 31 of a financial year must submit an e-form Dir-3 KYC to the Central Government on or before the April 30 of the next consecutive year.

Penalty for Non-Compliance of Rule 12A

• A penalty of INR 5000 shall be imposed by the Ministry of Corporate Affairs if the above form is submitted after the passing of the stipulated period.
• DIN shall be deactivated which would mean the loss of directorship of the company.

Causes for Rejection of a DIR-3 KYC Form

• Failure in submitting supporting documents, like address proofs or identity proofs.
• Invalid Application or supporting documents: –
• Submitted documents are invalid or expired.
• Proof of identity submitted is not issued by a governmental/statutory/regulatory body.
• If the applicant has applied for a DIN when he already has one which is either pending or approved
• The submitted application has no photograph
• Signatures have not been made at the designated places.
• The applicant’s name in the application does not match the one in the attached documents.
• The name of the applicant’s father in the application does not match the one in the attached documents.
• The applicant’s date of birth in the application does not match the one mentioned in the attached documents.
• The address of the applicant in the application does not match the one in the attached documents.
• The gender has not been correctly mentioned in the application form DIR-3
• The identification number in the application does not match the one in the attached documents.
• The supporting documents have not been attested.

Conclusion

The DIR-3 KYC form has a very specific purpose, to get a record of directors of a company and prevent them from using their power obtained by virtue of their position for malicious purposes, as a provision of the Companies Act allows the directors to be legally prosecuted under section 448 of the Companies Act 2013 in case enough incriminating evidence is found against them. If a change must be made in the DIR-3 KYC form, the applicant/director has to submit a DIR- 6 Form digitally signed by a certified cost accountant, chartered accountant or company secretary along with an attested document that requires said change.

References:

• https://cleartax.in/s/directors-kyc-mca
• https://assets1.cleartax-cdn.com/s/img/2018/07/19145644/form.pdf
• https://taxguru.in/company-law/dir-3-kyc-steps-filing-form.html
• https://ebizfiling.com/blog/all-you-should-know-about-director-kyc/
• https://blog.saginfotech.com/dir-3-kyc-form
• https://www.mca.gov.in/MinistryV2/applyfordin.html
• https://www.mca.gov.in/MCA21/dca/help/instructionkit/NCA/Form_DIR-3_help.pdf

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Other Sources:

[1]Section 266, Companies Act 2013, Constitution of India

[2]Rule 11(2) of The Companies (Appointment and Qualification of Directors) Rules, 2014, Constitution of India

[3]Rule 11(3)of the Companies (Appointment and Qualification Of Directors) Rules, 2014, Constitution of India

[4]Companies (Registration Offices and Fees) Rules, 2014, Constitution of India.

[5]Rule 12 A of the Companies (Appointment and Qualification Of Directors) Rules, 2014, Constitution of India