Form DIR 3-KYC goes Live By Vallari Dubey | Assistant Manager at Vinod Kothari & Company


Introduction

MCA has recently issued Companies (Appointment and Qualification of Directors) Rules, 2014, vide notification dated 5th July, 2018, effective from 10th July, 2018, introducing new eForm-3- KYC, pursuant to insertion of new rule 12A.

The Form went live on the MCA website on 14th July, 2018 and is now available for download. The Form has to be compulsorily filed in respect of all the directors of the company.
 
"The new Rule 12A has been inserted vide no specific powers under any provision of the Companies Act, 2013. It also mandates for several new requirements which are prima facie impractical to comply with. Several issues surrounding the new KYC requirements have been interestingly covered in the write up by Mr Vinod Kothari here."
 
The requirements, implications and issues arising out of the same are discussed hereunder:
 
Prerequisites for filing the e-Form

In line with the newly introduced eForm DIR 3-KYC, following are the pre-requisites for the purpose of filing:

  • Personal DSC of each director
  • Personal mobile no. of each director
  • Personal e-mail ID of each director
Due dates of filing

  • Last date of filing for those already having DIN - 31st August, 2018 Extended till Sept 15, 2018
  • Last date of filing for others - as soon as DIN is obtained
Consequences of non-filing

  • Deactivation of DIN
  • INR 5,000 if filed after Sept 15, 2018, for those already having DIN
Actionable

  • File the Form for directors having DIN
  • Obtain DIN for others
Future compliance for those obtaining fresh DIN

  • DIN allotted as on 31st March of a FY - Filing must be done, latest by 30th April of immediate next FY
Issues and worries

We have discussed each of the issues arising from the introduction of Form DIR-3-KYC, herein below:
 
Mandatory personal mobile number

The new Form requires inputting the personal mobile number of the director. This is not feasible for all the directors, especially, foreign directors. Not all the directors may necessarily have a mobile number, and even if they do, the requirement further extends to verification of the provided number in form of OTP, providing which will be an absolute inconvenience. This means the secretarial team will have to fill the form on the real time basis. To add, it is quite obvious that the mobile numbers of the directors may change frequently, making the data so provided obsolete and will not serve the purpose in long-term.
 
Mandatory personal E-mail ID

For it was not enough to have mandated inputting personal mobile number, the Form further requires inputting the personal email id of the director. This is not feasible for a director who does not have an email id. Akin to the aforesaid problem with a mobile number, it will be difficult to provide OTP details other on the real time basis.
 
E-mail ID and mobile number are a matter of choice for any person. The question here is, how apt the new KYC requirements are and whether they are apt at all in the first place? innocent
 
Mandatory personal DSC

A new requirement has been introduced, according to which, application for DIN, has to be filed for using the personal DSC of the director, for whom the application is filed. This is a recent requirement which did not exist earlier. Many directors do not have their own DSC. Additionally, the new process to obtain DIN requires a video and voice call verification for the applicant. Therefore, the requirement to obtain DIN by such Directors who are not required to file any e-Form is an administrative requirement and a futile exercise.
 
Simpler methods

The Ministry could have introduced simpler methods of KYC verification process. KYC can be done simply by specifying PAN/ Aadhar/ Passport as the person has to submit documents to the issuing authority to obtain the same. If the individual possesses any of these, then they suffice for KYC purpose. The requirement of email/ mobile number and OTP is procedural and will not serve any additional purpose. It should therefore, be made an optional requirement.
 
Deactivation of DIN

As per the new requirement, non-filing of Form DIR-3-KYC will result into deactivation of DIN. It must however, be noted that Companies Act, 2013 (‘the Act’) does not provide any specific provision w.r.t. deactivation of DIN.
 
Deactivation does not make the DIN invalid, but simply deactivates it, and therefore does not trigger disqualification. As per Section 164 (1) (h) of the Act, the disqualification will arise only if the person does not have DIN. There is no reference to the activate and de-activated DIN. So the effect of de-activation will only be limited the to inability to file any eForm.
 
It may be expected that since a mere deactivation does not result into anything material, the Ministry may simply direct disqualification of directors, whose DINs are deactivated on account of non-filing of Form DIR-3-KYC. This needs to be taken up with MCA urgently.
 
Conclusion

With the last date for filing the form approaching fast, it becomes even more important to take up all the issues to the Ministry for appropriate changes and clarifications. A mandatory mobile number, email id and own DSC will hamper the process more than fulfilling KYC purpose. Aadhar is a nationally valid proof of identity of a person, which is permanent as against a mobile number and serves a far greater purpose.

Had any queries/information required, email us at corplaw@vinodkothari.com
 
All the aforesaid issues raise alarm and must be addressed appropriately by the MCA.

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