The ministry of corporate affairs has ordered that it will be conducting the KYC exercise with all the 50 lakh individuals holding DINs, or director identification numbers, being asked to fill up an electronic form by August 31.
The 30-35 lakh “active directors” on company boards will have to submit PAN-authenticated digital signatures and a certificate from a chartered accountant or a company secretary to remain on boards as part of a massive KYC exercise undertaken by the government to ensure that only genuine individuals are responsible for running the affairs of companies.
The ministry of corporate affairs has ordered that it will be conducting the KYC exercise with all the 50 lakh individuals holding DINs, or director identification numbers, being asked to fill up an electronic form by August 31. Those who do not submit the form will see their DINs deactivated. The exercise covers all DINs issued up to March 31, 2018.
The details of KYC, such as digital signature and certification by a chartered accountant or a company secretary, will be specified shortly as the government is invoking a legal provision to ask two professional institutes — ICAI and ICSI — to help in the “national cause” to clean up businesses.
The plan for KYC is part of the government’s drive to rid the corporate sector of shell companies and bogus directors as it has seen that rogue businessmen often designate their household helps, drivers or gardeners as board members. Most of the times, these individuals do not even know that they are directors on boards of companies promoted by their employers and details come to light only when action is initiated against the company or its owners. “The exercise will help clean up the sector, at least from now on,” said an official.
While the original plan was to go for an Aadhaar-linked authentication, the move had to be shelved in the wake of the ongoing case in the Supreme Court. PAN-authenticated digital signatures will also serve the purpose, explained government officials. PAN in the digital signature will be matched with the income tax department’s database to ensure that bogus directors are weeded out. Besides, most of the PANs are linked to Aadhaar, providing further comfort.
In addition, requirement for a certificate from a CA or CS will also ensure that the director’s credentials are verified and the board member knows about his or her legal status.
The norms would be applicable to Indian as well as foreign directors on the boards of Indian companies.
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