21 lakh company directors fail to register for eligibility

NEW DELHI: Less than 12 lakh individuals, or just over 35% of the 33 lakh “active directors” have complied with the newly-mandated know-your customer or KYC requirement to be eligible for board positions in companies.

The deadline ended on Saturday midnight and the ministry of corporate affairs (MCA) is unlikely to extend it. The MCA will freeze the director identification number (DINs) of those who do not meet the new guidelines.

Earlier this year, MCA had mandated that individuals with DINs complete KYC formalities by September 15. The move was part of a clean-up drive meant to rid several company boards of drivers, domestic helps, and others who were nominated on company boards without their knowledge.


The ineligible directors again become eligible after they comply with the registration requirement and pay a fee of Rs 5,000.

While close to 50 lakh DINs have been issued, only 33 lakh were considered to be active directors. Even among this lot, a large number is likely to be ghost directors.

The KYC rules are part of a larger exercise to shut down shell companies and identify those with “significant beneficial ownership” or entities that hold over 10% stake in listed and unlisted companies. As part of the crackdown on shell companies nearly three lakh companies that had not filed returns have been deregistered and over three lakh directors have been disqualified.

The government believes that shell companies and bogus directors are key channels to generating black money. Funds are routed through a web of companies, whose real ownership is not easily available.

While PAN for most of the directors has already been linked, the government has also mandated linking of Aadhaar with DINs. Those without Aadaar (a very small number) have been exempted for the moment. DIN holders are also required to sign a form that needs to be authenticated by a chartered accountant or a company secretary.