Friday, December 8

Consequences of Not Complying with DIR-3 KYC Mandate

Ministry of Corporate Affairs had mandated Directors of all companies (Private Limited, Public Limited, OPC), and designated Partners in Limited Liability Partnerships (LLP), including both active and disqualified directors, to submit their KYC details by furnishing the DIR 3 KYC e-Form. This initiative taken by the Ministry of Corporate Affairs will have a great impact and help to curb fake and shell companies. These are the companies suspected to have conduits for illicit money laundering.

MCA had told that there are about 50 Lakh DINs issued till date and out of which there are around 33 Lakh Active Directors in India who are mandated to comply with this KYC mandate. If any director fails to submit their DIR 3 KYC form on or before the due date the DIN number of such director will be Deactivated and levied a penalty or late fee of Rs 5,000 for reactivation.

All directors were expected to submit their DIR 3 KYC Form on or before 31 Aug 2018 and the same is later extended to 15th Sep 2018. MCA had confirmed that there will not be any further extension in the last date of filing without late fee.

Out of 33 lakh, active directors in India and only around 12.16 lakh directors have completed the KYC mandate within the stipulated date. The rest 21 lakh failed to comply with the rule and their DINs are deactivated by MCA. It has been observed that drivers, domestic helpers were used to created shell companies and where appointed as directors of such companies.

It is also identified that there are 628 directors who have multiple DINs and they are associated with 1260 unique DIN number. MCA directed these directors to retain the oldest DIN and submit all other additional DINs.

MCA suspended acceptance of DIR 3 KYC Form between 16th to 20th Sep to complete the deactivation process. The acceptance of DIR 3 KYC Form resumed again from 21st Sep 2018. MCA notified that the directors can file their DIR 3 KYC Form with a late fee of only Rs 500 instead of Rs 5,000 till 5th Oct 2018. Effective from 6th Oct 2018, Rs 5,000 late fee will be applicable.

Consequences of not filing DIR 3 KYC:

  • The DIN of non-compliant directors is Deactivated
  • Non-compliant directors are liable to pay penalty or a late fee of Rs 5,000 for reactivation
  • They will not be able to incorporate any new company using their Deactivated DIN
  • MCA Corporate Filing Services such as submission of annual returns, annual reports, the filing of incorporation forms, etc cannot be availed using their Deactivated DIN

For directors who have deactivated DIN due to ‘Non-filing of DIR 3 KYC’ can reach out to D3KYC Service for filing their DIR 3 KYC form to MCA. The D3KYC Service team is a group of Chartered Accountants who take care of the entire filing process of DIR 3 KYC to MCA.

Reference Links:

  1. Directors Having Multiple DINs
  2. Check DIN KYC Status
  3. Corporate Affairs Ministry directs all company directors to submit KYC details
  4. Govt to deactivate DINs of 21 lakh directors over KYC non-compliance
  5. KYC non-compliance: Govt starts de-activating identification numbers of 21 lakh directors
  6. Legality of MCA’s Notification on Annual KYC of Directors
  7. DIR 3 KYC or Director KYC FAQs

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