In yet another attempt to curb the creation of black money and shell companies, the government has now cracked the whip on company directors who failed to comply with the KYC norms by 15 September.
The MCA officials claim that out of 33 lakh directors, only 12 lakh had completed the KYC process for free, by the last date of 15 September. The government is now looking to deactivate 21 lakh directors identification numbers (DINs).
However, all is not lost. Those directors who have not been able to complete the process can still do so by paying a fee of Rs 5,000.
In a statement issued on 16 September, the MCA said: “As you are aware the last date for filing form DIR-3 KYC without fee has expired on 15th September 2018. The process of deactivating the non-compliant DINs is in progress and is likely to be completed by 17 September 2018. Please note that the form DIR-3 KYC will not be available for filing during the pendency of this activity from 16-17 September 2018.”
Though it seems the government may extend the date for KYC without fee by another 15 days.
So what was the purpose of the whole exercise? How does it help in cleaning the ‘shell’ companies?
The purpose is to get rid of the ghost directors — those directors, who do not even know they are directors in companies. Some of them may be peon or drivers of the owners of a company. In some cases, the director could have been long dead but his/her name continues to appear in the list of directors.
Pavan Kumar Vijay, founder and managing director of advisory firm Corporate Professional, explains: “There are some 11.5 lakh companies registered with MCA. Out of these, 80,000 are public limited companies and the rest are private limited companies, which require just two directors. In many of these (private limited) companies, the proprietor of the company have made their driver, peon or cook as the director of the company to fulfil the regulatory requirements. Earlier, nobody cared to ask for their Aadhar or PAN. But now that this exercise has started many of such directors would cease to exist.”