Director’s KYC Compliance

Director’s KYC (Know Your Customer) compliance is an annual regulatory requirement for all directors of registered companies in India, ensuring that their details are up-to-date in the Ministry of Corporate Affairs (MCA) records. This requirement aims to maintain accurate records of directors, ensuring transparency and accountability in corporate governance. Each director must complete KYC annually by filing the DIR-3 KYC form.

Purpose of Director’s KYC Compliance

  1. Maintaining Updated Records: Ensures that MCA has the latest contact details and identity information for directors.
  2. Identity Verification: Confirms the identity of directors to prevent cases of fraud or impersonation in company management.
  3. Corporate Transparency: Enhances transparency and governance by maintaining a verified database of all active directors.
  4. Compliance with the Companies Act: Regularly updating KYC is part of statutory compliance under the Companies Act, 2013.

Eligibility for KYC Compliance

  • All individuals who have been allotted a Director Identification Number (DIN) and are currently serving as directors in a company.
  • Directors must complete KYC if they want to continue holding a valid DIN.

Compliance Requirements for Director’s KYC

  1. Form DIR-3 KYC:
  1. This form must be submitted for each director who was assigned a DIN on or before the end of the previous financial year and is intended to be kept active.
  2. The DIR-3 KYC form can be submitted online through the MCA portal.
  3. Form DIR-3 KYC-Web:
  4. Directors who have completed KYC once and have no changes to report in their personal information can file the simpler DIR-3 KYC-Web.

Process for Director’s KYC Filing

  1. Documentation:
  2. Prepare the following documents:
    • PAN Card (for Indian directors).
    • Passport (for foreign nationals).
    • Aadhaar Card (for Indian directors) or other government-issued identification.
    • Mobile number and email address (for OTP verification).
    • Residential address proof (utility bill, rental agreement, etc., not older than two months).
    • Digital Signature Certificate (DSC) of the director (for Form DIR-3 KYC).
  3. Submission Process:
  1. Step 1: Log in to the MCA portal and select the DIR-3 KYC form.
  2. Step 2: Fill out the form, providing all necessary details, including DIN, contact information, and address.
  3. Step 3: Verify mobile number and email address through OTP sent to the registered contact details.
  4. Step 4: Attach the required documents and sign the form using the Digital Signature Certificate (DSC).
  5. Step 5: Submit the form electronically via the MCA portal.
  6. Form DIR-3 KYC-Web:
  7. For subsequent years, if there are no changes in the director’s information, they can complete the KYC by verifying their details using the DIR-3 KYC-Web form.

Filing Timeline

  • Deadline: Director’s KYC must be filed annually by September 30.
  • Penalty for Late Filing: Failure to meet the deadline attracts a penalty of ₹5,000 per director for activating the DIN, which is deactivated upon non-compliance.

Key Documents Required

  1. Indian Directors:
  1. PAN card (mandatory for Indian nationals).
  2. Aadhaar card.
  3. Residential address proof (not older than two months).
  4. Passport-sized photograph.
  5. Digital Signature Certificate (DSC).
  6. Foreign Directors:
  1. Passport (mandatory for foreign nationals).
  2. Residential address proof (not older than two months).
  3. Email address and mobile number for OTP verification.
  4. Passport-sized photograph.
  5. Digital Signature Certificate (DSC).

Benefits of KYC Compliance for Directors

  1. Active DIN Status: Filing KYC ensures the DIN remains active, allowing directors to participate legally in company operations.
  2. Prevents Fraud: The identity verification process helps prevent cases of identity theft or misuse of directorship by unauthorized persons.
  3. Regulatory Compliance: Avoids penalties by maintaining compliance with the Companies Act.
  4. Transparency in Corporate Governance: By updating records, KYC compliance enhances transparency, trustworthiness, and accountability within the corporate structure.

Consequences of Non-Compliance

  1. Deactivation of DIN: If KYC is not completed by the due date, the DIN will be deactivated by MCA.
  2. Penalty for Re-activation: A hefty penalty of ₹5,000 must be paid to reactivate the DIN and file the KYC form.
  3. Inability to Hold Office: Directors without active DINs cannot legally operate as company directors, which may affect the company’s compliance status.
  4. Legal and Regulatory Issues: Non-compliance may lead to scrutiny from regulatory bodies, impacting the company’s credibility and governance standing.

Charges for KYC Filing

  • Regular Filing: No fee if filed within the stipulated deadline.
  • Late Filing: ₹5,000 penalty per director for filing after the due date.

Ongoing Compliance

  • Annual Filing: Directors must complete KYC every year to keep their DIN active.
  • Update for Changes: In case of changes in personal information (such as contact details), the director must update the records with MCA and re-file the KYC.

Director’s KYC compliance is essential for every director, ensuring they can legally hold their position and participate in corporate activities. It is a straightforward process that, if neglected, can result in costly penalties and restrictions on the director’s legal authority within the company.