The Ministry of Corporate Affairs will soon launch an initiative Know Your Customer (KYC) for Companies, Chartered Accountants, Cost Accountants, and Company Secretaries in an attempt to weed out shell companies. Shell companies are companies with no real existence and their presence is merely on papers to carry out illegal activities as well as hold unaccounted money.
Last year MCA mandated directors to comply with the DIR 3 KYC requirements to weed out fake or ghost directors. Out of 33 lakh, active directors in India only around 16 lakh directors have completed the KYC mandate within the stipulated date. The initiative was a major step in finding out directors who had been involved in illicit funds flow.
Corporate affairs Secretary Injeti Srinivas said the KYC for Companies is an initiative that will make it mandatory for companies to share details of their key executives and professionals, including Company Secretaries, Cost Accountants, and Chartered Accountants.
The KYC process will enable MCA to identify shell companies, as those who are non-compliant to MCA norms, MCA 21 System will not register those companies. The companies who did not file annual reports will not be allowed to complete the KYC formalities.
Companies who do not comply with the KYC norms won’t be able to carry out important operations. If the company has non-compliant directors who have not filed for DIR – 3 KYC, then the system will not allow them to submit KYC. Now the companies will enforce directors to comply with the system and file Director’s KYC or will remove the directors from their respective directorships. Such companies would be allowed to transact with the Ministry of Corporate Affairs but would be shown as “non-compliant” in the system.
MCA will carry out KYC for all the professionals related to the company like – CA, Cost Accountants, and Company Secretaries. This drive will start after the Company KYC is done and all the professionals will be screened and then will be allowed to enter into MCA records.
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- Consequences of Not Complying with DIR-3 KYC Mandate
- Over 20 Lakh DIN are Deactivated by MCA as on 20 Sep 2018
- 55,000 Shell Companies Struck Off in 2nd Phase by MCA
- Names of 55K Directors Linked to Delisted ‘Shell Companies’
Reference Links:
- Corporate affairs ministry to collect KYC details of companies, CAs
- Corporate Affairs Ministry plans to collect KYC of companies, CAs
- In a drive against shell companies, KYC to be made mandatory for firms
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