An analysis of MCA announcement- KYC of director

images2TYIXVJYMinistry of Corporate Affairs (MCA) has made announcement on 28th June, 2018 for KYC of director, for ensuring genuineness of individuals occupying post of directors. The announcement is as follows:-

“As part of updating its registry, MCA would be conducting KYC of all Directors of all companies annually through a new e-form viz. DIR-3 KYC to be notified and deployed shortly. Accordingly, every Director who has been allotted DIN on or before 31st March, 2018 and whose DIN is in ‘Approved’ status, would be mandatorily required to file form DIR-3 KYC on or before 31st August,2018. While filing the form, the Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password(OTP). The form should be filed by every Director using his own DSC and should be duly certified by a practicing professional (CA/CS/CMA). Filing of DIR-3 KYC would be mandatory for Disqualified Directors also. After expiry of the due date by which the KYC form is to be filed, the MCA21 system will mark all approved DINs (allotted on or before 31st March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’ with reason as ‘Non-filing of DIR-3 KYC’. After the due date filing of DIR-3 KYC in respect of such deactivated DINs shall be allowed upon payment of a specified fee only, without prejudice to any other action that may be taken.”

An analysis of MCA announcement- KYC of director  can be viewed by clicking on the link.




online registrationThe Legal Entity Identifier (LEI) code is conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. LEI is a 20-digit unique code to identify parties to financial transactions worldwide.

The LEI for the participants of the OTC derivatives market has since been implemented vide RBI circular RBI/2016-17/314 FMRD.FMID No.14/11.01.007/2-16-17 dated June 01, 2017 in a phased manner.

RBI has been decided that the banks shall advise their existing large corporate borrowers having total exposures of Rs 50 crore and above to obtain LEI as per the schedule given in the Annex. Borrowers who do not obtain LEI as per the schedule are not to be granted renewal / enhancement of credit facilities. A separate roadmap for borrowers having exposure between Rs. 5 crore and up to  Rs.  50 crore would be issued in due course.

 1) An application for LEI may be filed by a legal entity after an online account has been opened by the applicant(s).

2) The date of filing an electronic application shall be deemed to be the date of submission of the form by the applicant(s).

3) An application shall be deemed to be received by LEIL when the applicant(s) receives the confirmation for the same.

4) On initial acceptance of an application and prior to issuance of LEI, the applicant(s) shall submit the documents for verification. The list of documents to be submitted by the legal entity shall be as advised by LEIL.

5) Final acceptance of the application shall be subject to verification of data by LEIL.

6) Verification of an online application referred to in clause 5 above shall without limitation include a check of the following:

Whether all mandatory fields of the form have been filled;

Whether the legal entity named in the online application has not already been issued LEI by LEIL or any other pre-LOU/LOU.

Whether the data entered in the online application of the legal entity to which LEIL is to issue LEI matches with the data in the relevant register of the business eegistry where the entity is registered.

7) LEIL shall have the right to reject the application for LEI, on failure of the legal entity to submit the specified documents within ten days of receiving the communication from LEIL for submission of documents.


Introduction of Graded Surveillance Measure (GSM)

DBSecurities and Exchange Board of India (SEBI) and Exchanges in order to enhance market integrity and safeguard interest of investors, have been introducing various enhanced pre-emptive surveillance measures such as reduction in price band, periodic call auction and transfer of securities to Trade to Trade category from time to time. The main objective of these measures is to;

  • alert and advice investors to be extra cautious while dealing in these securities and
  • advice market participants to carry out necessary due diligence while dealing in these  securities.

In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be additional Graded Surveillance Measures on securities which witness an abnormal price rise not commensurate with financial health and fundamentals like Earnings, Book value, Fixed assets, Net worth, P/E multiple, etc.

The list of such securities identified under GSM shall be informed to market participants separately and shall be available on exchanges website.

Further, GSM framework shall come in to action one week from the publishing of the list.

All market participants dealing in identified securities have to be extra cautious and diligent as, Exchanges and SEBI may at an appropriate time subject to satisfaction of certain criteria lay additional restrictions such as;

  • placing / continuing securities in trade to trade category,
  • requirement of depositing additional amount as Surveillance Deposit, which shall be retained for an extended period.
  • once in a week trading,
  • once in a month trading and
  • freezing of price on upper side of trading in securities, as may be required.
  • any other surveillance measure as deemed fit in the interest of maintaining the market integrity

All the aforesaid actions shall be triggered based on certain criteria and shall be made effective with a very short notice.

The above surveillance actions are without prejudice to the right of Exchanges and SEBI to take any other surveillance measures, in any manner, on a case to case basis or holistically depending upon the situation and circumstances as may be warranted.

The members trading in the identified securities either on their own account or on behalf of clients shall be kept under close scrutiny by the exchange and any misconduct shall be viewed seriously.

Further details of this framework are given as follows:-

 Graded Surveillance Measures (GSM) – shortlisting of Securities –

Securities shall be shortlisted based on the pre-defined objective criteria.

List shall be periodically reviewed & published by the exchanges in a coordinated manner.

Identification / review of securities for Graded surveillance measures shall be carried out twice a year.

In addition to existing Surveillance action being imposed from time to time, it may be noted that these securities shall be monitored for the price movement and based on the pre-determined objective criteria shall attract following additional graded surveillance measures:

Stage Surveillance Actions
I Transfer to trade for trade with price band of 5% or lower as applicable
II Trade for trade with price band of 5% or lower as applicable and Additional Surveillance Deposit (ASD) of 100% of trade value to be collected from Buyer
III Trading permitted once a week trading and ASD 100% of trade value to be deposited by the buyers (Every Monday)
IV Trading permitted once a week trading with ASD 200% of trade value to be deposited by the buyers (Every Monday)
V Trading permitted once a month trading with ASD 200% of trade value to be deposited by the buyers (First Monday of the month)
VI Trading permitted once a month with no upward movement in price of the security with ASD 200% of trade value to be deposited by the buyers (First Monday of the month)

Notes: –

The list of securities moving from higher stage of Graded Surveillance Measures shall be informed to the market, vide notice time to time.

Additional Surveillance Deposit (ASD) shall be paid only in form of cash and to be retained till review of the Graded Surveillance stages i.e. Quarterly review.

This ASD shall not be refunded or adjusted even if securities purchased is sold off at the later stage within a quarter and also shall not be considered for giving further exposure.

ASD shall be over and above existing margins or deposits levied by the Exchanges on transactions in such companies and shall be interest free.

In case of default in payment of ASD, penal actions may be initiated against the trading member.

In case the scheduled trading day is falling on a trading holiday, the trading shall be permitted on the next trading day.

Review of Graded Surveillance Measures for Relaxation:

A periodic review of securities under GSM framework, to assess relaxation of surveillance action, if any, shall be carried out on a quarterly basis. The review shall be done based on the objective criteria and only securities under Stage II onwards shall be eligible for the quarterly review. For example, a company in stage III of GSM can be moved back to stage II, if qualified based on the said objective criteria.


Rejig in SEBI(LODR) Regulations, at the eleventh hour

SEBI has come up with amendments in SEBI (LODR) Regulations on 25th May, 2016 regarding annual financial results, audit report and annual report while the last day for submission of annual financial results is 30th May, 2016, ie rejig at the eleventh hour. Comparative analysis along with impact of “Rejig in SEBI(LODR) Regulations, at the eleventh hour” can be viewed here.  – 27.05.2016

Some leeway to small company and one person company

 The Company law committee (CLC) has submitted its report on The Companies Act, 2013 to MCA on 1st February, 2016, suggesting more than hundred amendments in the existing Companies Act, 2013.In India, where around 83% of the companies falls in the category of small company and one person company, the recommendations of CLC pertaining to these companies are having wider impact and far reaching effect. Gathering all the probable impacts and effects, my article Some leeway to small company and one person company can be viewed here –   03.02.2016

Perfunctory Provisions for Postal Ballot Notice

very nature of postal ballot procedure makes it a win-win situation for all the stakeholders. Though it is recommendatory board decision to opt for postal ballot procedures, there is elephant in the room too. The contradiction lies in Rule 22(1) and Rule 22(12) of The Companies (Management and Administration) Rules, 2014, showing the perfunctory manner in which they are drafted. Perfunctory manner of provision left all the stakeholders perplexed since its advent from 1st April, 2014. Complete article Perfunctory Provisions for Postal Ballot Notice  can be viewed here  – 12.03.2016

Unrestricted Object for Companies, A look before leap

Unrestricted object for companies is one of the most liberal amendment for achieving ease of doing business. There is a complete paradigm shift from conventional approach of having specific object(s) to unrestricted object for companies, without any limitations, just like a natural person. This concept of unrestricted object is best suitable for a company where mostly all of the money is employed by the promoter. However, there are some nagging uncertainties that need clarifications. Look before leap is a-must. An article dealing with this subject Unrestricted Object for Companies, A look before leap can be viewed here – 01.07.2016.