The Ministry of Corporate Affairs (MCA) is likely to freeze the Director Identification Numbers (DINs) of those who do not meet the new KYC guidelines.
Nearly 2.1 million individuals, out of 3.3 million 'active directors', have failed to register their basic information under the newly-mandated know-your-customer (KYC) requirement to be eligible for board positions in companies, according to a report by The Times of India. The deadline set by Ministry of Corporate Affairs (MCA) for the same was September 15.
Moneycontrol had first reported that about 1.8 million independent directors serving on boards of thousands of companies could actually turn out to be dummies, according to initial trends of the government drive initiated to weed out fake names being listed as genuine directors.
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.
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.
DIN is a unique number allotted to individuals who are eligible to have directorship on the boards of registered companies.
The company directors were required to link their Aadhaar and PAN numbers with DINs. DIN holders were also required to sign a form that needs to be authenticated by a chartered accountant or a company secretary.
The move was aimed at weeding out fake names being listed as genuine directors. This was a part of the government’s larger strategy to clamp down on shell or paper companies that seek to operate outside regulatory boundaries.
Many such companies are under the authorities’ lens for allegedly serving as conduits of undisclosed funds to evade taxes.
The ineligible directors can become eligible after they comply with the registration requirement and pay a fee of Rs 5,000, the report adds.Shell companies and bogus directors are conceived as key channels for generating black money as funds are transferred through a web of companies, whose real ownership is not easily available. Thus, the government has been working towards weeding them out.