According to a report by the Times of India, more than 21 lakh individuals have failed to comply as per the new mandated KYC requirement, for eligibility of being a director of a company. These numbers are from 33 lakh list of active directors. The KYC requires some basic information, and strangely enough, more than 21 lakh people have failed to update so by the deadline set by the Ministry of Corporate Affairs for September 15th.

The Report

As per an earlier report, about 18 lakh independent directors listed could be fake. They are mere dummy names and government’s initial goal is to weed out such fake names
As part of the mega KYC drive, company directors had to provide their passport, PAN number and contact details, such as personal phone number and email addresses.
“Out of 3.3 million directors (expected to carry out know your customer or KYC process), only 1.5 million or 40-50 percent could be genuine. There is a likelihood that the rest are dummy directors, who are not updating even their basic information such as phone numbers and email ids,” a senior government official had told Moneycontrol.

DIN

The ministry is likely to freeze the Director Identification Numbers (DIN) of those who failed to meet the new guidelines as it is unlikely to extend the deadline, the report suggests.
Director Identification Number is allotted to those who are eligible for being on board as directors of the companies. They had to link their Aadhaar and PAN numbers with DIN and they also need to sign a form that needs to be authenticated by a CA or CS.

This drive’s sole aim was to weed out fake names to meet the larger goal of clamping down on paper companies that operate outside regulatory boundaries. These companies are just a name on the paper and usually a cover up for other illegal acts or in order to evade taxes.

Becoming Eligible Again

The government is strict about the ineligible directors becoming directors again. They would require complying with all requirements of KYC and also paying a fine of Rs 5000 and only then they would become eligible again.

It’s a great initiative taken by the government and everyone must support.