All you want to know about the Director KYC process in India

As we all know, a company is a separate legal entity having its distinct identity apart from its shareholders and its management. However, it is the board of directors who are typically known as the brains and hands of the company. Every start-up company /LLP has its designated partners and directors on its board, however, only a few founders and entrepreneurs give the board composition much thought.

Therefore, a director is a person appointed by the company who is both individually as well as collectively responsible for making significant business decisions such as hiring and firing employees, budget approvals, managing finances through investments, raising capital, etc., and ensuring the well-being of the company. Similarly, in case the start-up is a Limited Liability Partnership or LLP, it is the designated partners of the LLP play a similar role in the management of the key affairs of the LLP.

With added responsibilities towards the business-related compliances, there are certain compliances specifically applicable to these directors/designated partners, one of the major being the Director KYC process under the provisions of the Companies Act 2013. As notified under the MCA guidelines, it is mandatory for each director and designated partner of each LLP who holds a unique Director Identification Number (DIN) and fulfills KYC-related compliances every year regardless of the status of the DIN i.e. active or inactive.

What is the DIR-3 KYC process? How does it work?

Before getting to know more about, the DIR-3 KYC form, it is important to know that every person who is appointed as a director/designated partner in any company or LLP is required to obtain a unique eight digit identification number before the appointment known as Director Identification Number(DIN). As its name suggests, it is a unique identification number for directors and it is required to be obtained by every individual who intends to become a director in a company.

Similarly, the term KYC stands for “Know your Customer” that was introduced by the Union Ministry of Corporate Affairs (MCA) to reaffirm the identity of directors, create transparency of information and weed out the bogus directorships.

The MCA (Ministry of Corporate Affairs) introduced the new e-form DIR-3 KYC under Rule 12A ‘Companies (Appointment and Qualification of Directors) notified on 10.07.2018. This new e-form is also applicable for the restoration of the deactivated DIN (Director Identification Number) of the directors.

In the beginning, the process of obtaining DIN and KYC for directors was a one-time process for any person who wants to be a director in one or more companies. But, the Ministry of Corporate Affairs (MCA) notified that from the financial year 2019-20 onwards, it shall be mandatory for every director who has been allotted a DIN number either on or before the end of the financial year and those whose DIN is in approved status currently, will be required to file form DIR-3 KYC before 30th September of the immediately next financial year.

even if the director has been disqualified from his position so that they are aware of and confirm the data & information as available in the MCA21 system.

Further, intending to make the form more user-friendly the MCA has modified the e-form DIR-3 enabling features like pre-filling of data & information so that annual filings can be done by DIN holders in a simple and user-friendly manner. Additionally, the MCA registry has enabled the web-based filling of the form DIR-3, without any need to submit or upload any document.

However, if the director needs to change his particulars, he can do so on the MCA portal while submitting KYC for the directors for the previous financial year if he has filed pdf-based director KYC. However, if particulars such as communication details are required to be updated then they could be updated when filing for directors’ KYC within its due date i.e. 30^th September. In cases where the director fails to submit KYC within the due date, his DIN shall be deactivated and shall be restored only after a late filing fee of Rs, 5000/- made along with the KYC.

Type of DIR-3 KYC Filing

Provided below are the two types of DIR-3 KYC e-form for the previous financial year as provided below-

i. KYC Update through DIR-3C

This e-form is applicable in the case of a director/designated partner who is filling KYC details for the first time with the MCA and there is no other option for the person to access web services for fulfillment of the KYC process.

Also, in case any DIN holder wishes to update his particulars could do the same by filling this e-form DIR-3 KYC and not the web-services DIR-3C form.

ii. KYC through DIR-3C web services

Any director/designated partner who already holds a valid DIN has already submitted the e-form DIR-3C in the previous financial years with no requirement of any update on the KYC details as submitted on the MCA portal may perform his annual KYC by retrieving the DIR-3 KYC web services to fulfill KYC procedure.

Process of filling DIR – 3 KYC Form

Provided below is the step-by-step process of filing DIR-3 KYC Form-

i. Download the e-form from the MCA portal

In the first step, log in to the MCA portal and click download for the e-form DIR-3C.

ii.  Fill DIN related details

The director/designated partner next should fill the DIN-related details in the KYC form for which the status should be approved or active. For those DIN holders, whose DIN stands deactivated or inactive, they shall be allowed to fill the form after submission of late filing fees.

iii. Enter Relevant Details in the DIR- 3 KYC Form

Next, the following particulars are required to be mentioned in the KYC form-

• Name and relevant details- The applicant shall be required to fill in details such as the name of the applicant, father’s name, and last name. The name so entered must match the name mentioned in the PAN identification, and the address so mentioned must be verified with the PAN database. Any acronyms, short forms, and single alphabets shall not be allowed.

• Nationality- Next, the applicant shall be required to declare his nationality. In case the applicant is a foreign national, then it shall be compulsory for the applicant to provide a copy of his passport.
• Age declaration-The applicant should have attained a majority at the time of the application. The date of birth of the applicant must be entered in the DD/MM/YYYY format.
• Address-It is mandatory to fill in the details related to the permanent residential address along with the proof of permanent address. In the case of a foreign applicant, the state to be selected should be NA. Where the current address of the applicant is not as same as his permanent residential address, it is compulsory to provide the current address of residence too.
• PAN verification- While making an application in DIN, it is compulsory to declare the PAN identification number of the applicant. Once entering PAN details, click

‘Verify income-tax PAN’ and then the system will verify details based on PAN number. For successful validation of the process, the PAN details so mentioned should be the PAN details provided in the Digital Signature Certificate (DSC).

In case the foreign nationals do not have a PAN identity, the name so mentioned in the form must match the name so provided in the DSC for successful validation.

Step 4- Updating Contact Details and final OTP verification

For successful completion of the process, the applicant should provide a mobile number which should be verified by an OTP. Similarly, the applicant shall be required to enter his email ID which would also be further verified through OTP authentication.

After the successful completion of the verification process, click on ‘Generate OTP’ after which two OTPs would be sent to the provided mobile number and email ID.

Process after form submission

SRN Generation

Upon the successful submission of the e-Form DIR-3 KYC, a Service Request Number (SRN) will be generated for the applicant that could be used for future reference purposes.

Email communication

An email with the approval of the request would be communicated to the applicant on the provided e-mail id. Upon receipt of the email, the process of filling e-Form DIR-3 KYC is complete.

 Who can file DIR-3 KYC?

The following persons shall be required to file the DIR-3C KYC form every year-

i. Any director/designated partner who is filling his KYC details for the first time with the MCA registry.

ii. Any DIN holder who has filed KYC previously but wishes to update any of his particulars through the filing of e-form DIR-3 KYC only and not through the web service for DIR-3 KYC form.

iii. Any DIN holder who has already submitted e-Form DIR-3 KYC in any of the previous financial years and does need to update any of his personal information may perform his annual KYC by accessing the DIR-3 KYC web services form on the portal. Please note that no update in details could be made solely by accessing the web service for DIR-3 KYC.

iv. KYC shall also be mandatory for the disqualified directors.

Who are the signatories to the DIR-3C KYC form?

The DIR-3 KYC form must be signed and certified by the DIN holder and a professional (CA/CS/CMA). It is also important to mention that in case of the applicant is an Indian national, the PAN mentioned in the DSC is verified with the PAN mentioned in the form.

What are the documents required for the DIR-3C KYC form?

i. Proof of Nationality & Citizenship of the Applicant.

ii. Basic details such as Address, communication details, gender & date of birth.

iii. Permanent Account Number (PAN) details of the applicant.

iv. Voters’ Identity/Passport in case of foreign national.

v. Driving License.

vi. Aadhaar Details of the applicant

Apart from the above-mentioned, the following items must be kept ready-

i. Digital signature Certificate of the applicant (whether Indian or foreign national)

ii. Attestation of the above-mentioned documents from a practicing professional such as a CA/CS/CMA. In the case of Foreign Nationals, documents need to be attested by an authority having similar status and recognized by the Govt. of India.

iii. A declaration in the prescribed format is attested and acknowledged by the practicing professionals.

Due Dates & Annual Compliance related to KYC

As per the provisions of Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014, every individual who holds a valid DIN which is either approved or active status on 31st March of a financial year must submit his KYC on or before 30th September of the immediately next financial year.

 Contravention & Penalty

In case a director fails to file the DIR-3C KYC form either on or before 30th September on MCA 21 portal, the department shall mark the DIN of such director as ‘Deactivated due to Non-filing of DIR-3 KYC’. If such a director wishes to file KYC, such a director shall be required to re-activate his DIN by paying a late filing fee of Rs. 5000/- and complete the process.

Checkpoints while filing the e-Form DIR-3 KYC

• It shall be necessary to provide the personal mobile number and email address of each applicant while filling the e-form which shall be later verified through OTP authentication.
• Next, the director shall be required to apply his digital signature while filing this e-Form.

Finally, it shall be compulsory to provide complete and right information while filling the e-form and later such information shall be certified by a practicing Chartered Accountant/Company Secretary, or a Cost and Management Accountant.