India’s Ministry of Corporate Affairs (MCA) is having a busy year. After cracking down on shell companies and LLPs, they have now introduced more stringent KYC norms for directors and designated partners of LLPs in India.

The new E-Form DIR-3 KYC is meant to be filed annually and is meant to track the identity of directors in Indian companies and LLPs. The idea behind this could be to have greater transparency and accountability for directors as well as to put measures into place to deal with non-compliance even in the future.

1. Purpose of the rules: To update KYC of all persons having a Director Identification Number (DIN) irrespective of whether such person currently holds any directorship or not. It is pertinent to note here that disqualified directors are also required to file this form.

2. Mandated date for compliance: 31st August, 2018 for any directors who had a DIN prior to 31^st March, 2018. For others, the due date is 30th April, 2018 of the immediate next financial year. [The Indian financial year runs from 1st April to 31st March].The compliance dates are the same for resident and overseas directors.

3. Applicability: All persons who hold a DIN, whether Indian resident/ non-resident Indian / foreign national are required to file e-form DIR-3.

1. What are the consequences of non-compliance?

In case a director fails to provide his details in e-form DIR-3 KYC within the stipulated time, the director’s DIN will be deactivated and the MCA21 system will mark all approved DINs against which DIR-3 KYC form has not been filed as ‘deactivated’. The deactivated DIN shall be reactivated only after filing of e-form DIR-3 KYC along with prescribed fees as prescribed under Companies Rules, 2014. The late filing penalty is Rs.5000 from 1st September, 2018.

More importantly, while a DIN remains inactive, the director/partner will be unable to sign any compliance documents on behalf of any company/LLP. As most companies in India finalize their accounts and taxes in September, this could create substantial difficulties and non-compliances for companies whose directors have not submitted the DIR-3 KYC.

2. What if the documents are not in English or Hindi?

In case of proofs which are in languages other than Hindi/English, the proofs should be translated into English or by a professional translator carrying his details and seal. In the case of foreign nationals, translation done by a notary of home country is also acceptable.

3. Any other requirements?

The director’s name in the form, in the DSC and on their PAN card needs to match. If not, the documents will need to be modified. Mobile number and email address need to be the director’s personal ones only, i.e. a generic office email / number cannot be used.