Comprehensive Guide to DIR-3 KYC

In 2018, the Ministry of Corporate Affairs (MCA) of India took a significant step towards enhancing transparency within the corporate sector by introducing the DIR-3 KYC compliance mandate. Aimed at bolstering corporate governance practices, this regulation focuses on implementing Know Your Customer (KYC) norms for directors across all Indian registered companies. Over time, it has become an indispensable component of India’s regulatory framework, and directors are required to fully grasp its implications.

  • Starting from the Financial Year 2019-20, compliance with this mandate has been made mandatory for all directors who were assigned a Director Identification Number (DIN) on or before the conclusion of the previous financial year, provided their DIN is in an approved status.
  • To meet the requirement, directors must diligently file the DIR-3 KYC form before the 30th of September of the immediately following financial year.
  • By adopting this proactive approach to collecting and verifying director-related information, the MCA seeks to ensure that corporate entities in India maintain the highest standards of corporate governance and accountability.
  • The KYC compliance initiative not only enhances transparency but also helps in mitigating the risks associated with financial fraud and identity theft within the corporate landscape.
  • Directors, as key decision-makers and custodians of a company’s interests, bear a significant responsibility in upholding corporate integrity.
  • Complying with the DIR-3 KYC mandate is not just a regulatory obligation; it signifies a commitment to fostering trust among stakeholders, investors, and the public.

Introducing the DIR-3 KYC:

In pursuit of eradicating fraudulent practices within the corporate landscape, the Ministry of Corporate Affairs (MCA) has issued the DIR-3 KYC form. This crucial measure mandates that every director, holding a Director Identification Number (DIN) as of the 31st of March in any financial year, must dutifully submit their KYC details to the MCA.

  • The primary objective behind the implementation of the DIR-3 KYC compliance is to establish and maintain an updated database of all individuals holding directorial positions in Indian companies.
  • This, in turn, shall bolster the overall accountability and transparency of these corporate entities.
  • The MCA has thoughtfully provided two distinct methods for filing the KYC, carefully catering to varying scenarios – the DIR-3 KYC Form and the DIR-3 KYC Web.
  • This thoughtful approach acknowledges the diverse needs and circumstances of directors, streamlining the process and ensuring comprehensive KYC compliance.
  • By adhering to the DIR-3 KYC requirements, directors contribute significantly to the overall integrity of the corporate ecosystem.
  • By ensuring their KYC information is accurately submitted, the MCA can effectively track and verify the authenticity of directors’ identities and affiliations with Indian companies.
  • In essence, the DIR-3 KYC represents a vital step forward in bolstering the regulatory framework and promoting a culture of transparency, thereby instilling greater confidence among stakeholders and investors.
  • As Indian companies strive to build robust governance mechanisms, the implementation of the DIR-3 KYC marks a progressive stride towards a more accountable and trustworthy business environment.

The DIR-3 KYC Form is a comprehensive procedure for Know Your Customer (KYC) that must be completed under the following circumstances:

  1. When a director is submitting their KYC for the first time.
  2. When there have been changes to the director’s information since the last filing.

This form requires detailed information about the director, along with self-attested proof of identity and address. Afterward, a practicing professional, such as a Chartered Accountant, Company Secretary, or Cost and Management Accountant, must certify the information. The form also allows updates for significant details, such as changes in passport number, residential or permanent address, mobile number, and other relevant data.

DIR-3 KYC Web:

The DIR-3 KYC Web service simplifies and streamlines the traditional KYC process. Directors can easily verify their details stored in the MCA’s database through a straightforward online verification process. Once they have filed the initial DIR-3 KYC Form, they can use the web service in subsequent years, assuming their information remains unchanged. The verification process only requires directors to confirm their existing details using an OTP sent to their registered mobile number and email ID. This eliminates the need to upload and verify additional documents each year.

  • Requirements for DIR-3 KYC include personal information such as the director’s full name, father’s name, date of birth, and identification details like PAN (for Indian nationals) or Passport (for foreign nationals).
  • Address, email ID, and phone number are also mandatory. Nationality and citizenship status details must be provided as well.
  • Additionally, certain documents need to be attached, including a self-attested copy of the PAN card (for Indian citizens) or passport (for foreigners) as proof of identity, and a recent utility bill, bank statement, or property tax receipt as proof of address.
  • The personal mobile number and email ID will be verified through an OTP.
  • To comply with DIR-3 KYC, directors must fill out the form online, and it should be digitally signed by a practicing Chartered Accountant, Company Secretary, or Cost and Management Accountant.
  • The completed form should be submitted electronically on the MCA website. After successful submission, an acknowledgment will be generated, confirming the completion of the process.

It is crucial to note that the DIR-3 KYC needs to be filed annually on or before 30th September of the immediately subsequent financial year. Failure to comply with this regulation could result in the deactivation of the DIN and may lead to significant penalty charges.

Due Date for filing DIR-3 KYC Form for the Financial Year 2022-23

E Form Purpose of Form Timeline Due Date Remark
DIR-3 KYC Form KYC of Directors Annual Compliance 30th September 2023 Every individual who holds DIN as of 31st March 2023 and who has not filed DIR 3 KYC form previously or there is a change in the director’s passport number, residential or permanent address, mobile number, and other relevant data.
DIR-3 KYC Web KYC of Directors Annual Compliance 30th September 2023 Every individual who has previously filed DIR-3 KYC Form and there is no change in email id and mobile number.

What are the implications of not complying with the DIR-3 KYC regulation?

Failure to comply with the DIR-3 KYC regulation may result in the deactivation of the director’s DIN, significantly affecting their involvement in the company’s management. A deactivated DIN means that the director will be unable to sign any legal documents on behalf of the company. Moreover, reactivating the DIN is not a simple process and requires payment of a fine. The deactivation can only be reversed upon submission of the required KYC information along with a penalty of Rs 5000.

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