DIN application & allotment- the amendments

By Smriti Wadehra (corplaw@vinodkothari.com)

DIN application & allotment- the amendments

Introduction

The Ministry of Corporate Affairs is aiming towards ease of doing business and intends to simplify the procedure of incorporation of a company. As per the erstwhile provisions, the in order to incorporate a company the person proposed to hold directorship thereof had to first obtain DIN by filing form DIR-3 as DIN was one of the pre-requisite for making application for reservation of name in Form INC-1. This process was time taking considering separate DIR-3 for the respective directors were involved followed by application for name reservation in form INC-1 and then for incorporation in INC-32. To reduce the hassle of this multi layered incorporation process the Ministry has come up with Companies (Appointment and Qualification of Directors) Rules, 2014.

Application for DIN allotment

Rule 9(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014 till date provided as follows:

Every individual, who is to be appointed as director of a company shall make an application electronically in Form DIR-3, to the Central Government for the allotment of a Director Identification Number (DIN) along with such fees as provided in the Companies (Registration Offices and Fees) Rules, 2014”

Evidently, the said provisions were applicable to both, new and an existing company. Henceforth, the same will be applicable only to an existing company. The Companies (Appointment and Qualification of Directors) Amendment Rules, 2018 (Amendment Rules) has brought the following amendments by substituting the entire sub- rule as reproduced below:

“9. Application for allotment of Director identification Number before appointment in an existing company,

“(1) Every applicant, who intends to be appointed as director of an existing company shall make an application electronically in Form DIR-3, to the Central Government for allotment of a Director Identification Number (DIN) along with such fees as provided under the companies (Registration offices and Fees) Rules, 2014.

Provided that in case of proposed directors not having approved DIN, the particulars of maximum three directors shall be mentioned in Form No.INC-32 (spice) and DIN may be allotted to maximum three proposed directors through Form INC-32 (spice)”;”

The aforesaid changes are based on the Ministry’s “Starting a Business Easier” initiative. Now, the DIN allotment will be in two ways; for existing companies, through Form DIR- 3 and for new companies, through Form INC- 32 (Spice).

Sl. No Process of obtaining DIN New Company Existing Company
1. DIR-3 Not Required Required
2. INC-32 Required Not Required

 

Verification of Form DIR-3

The existing Rule 9(3)(b) of the Companies (Appointment and Qualification of Directors) Rules, 2014 provided for verification of Form DIR- 3 by-

  • a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; or
  • a company secretary in full time employment of the company or by the managing director or director of the company in which the applicant is to be appointed as director.”

The aforesaid Rule has now been changed to the effect that the verification will have to be done by a company secretary in full time employment of the company or by the managing director or director or CEO or CFO of the company in which the applicant is intended to be appointed as director in an existing company. Accordingly, there will be no role of a Practicing CS/ CA/CWA in verification of the said Form. Further, CEO and CFO are two more categories of persons newly authorised for the verification purpose.

Attachment in Form DIR-3

The existing Rule 9(3)(a) requires attachment of the following while filing e-form DIR-3:

(i) photograph;

(ii) proof of identity;

(iii) proof of residence; and

(v) specimen signature duly verified.

The Amendment Rules in addition to the aforesaid, requires the board resolution proposing appointment of director in the existing company. Therefore, unless there is an actual appointment (by passing a board resolution by the company), a person cannot make a random application for DIN allotment for the sake of holding one.

However as per the provisions of section 152 (4):

“4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Director Identification Number and a declaration that he is not disqualified to become a director under this Act.”

As per the aforesaid provisions of law, a director is required to have a DIN before appointment as a director in a company, however, to the contrary the revised procedure for applying DIN imposes a requirement that one can apply for DIN only if his/her appointment is certain. This is, certainly a contradictory provision as against the principal section i.e. section 152(4). Therefore, the question here arises as in how will the director furnish his DIN before appointment and provide declaration in form DIR-2 and DIR-8?

To this, one may take a view that the proposed appointee shall be required to furnish DIR-2 and DIR-8 to the company before appointment and wherever the particular DIN shall be asked, he shall be required to either state “NA” or else write to “To Be Applied After Provisional Appointment”.

Further the Board resolution required to be passed for appointment of director should showcase the proposed appointment on provisional basis and for this, the BR should be passed in such manner so as to approve the proposal to appoint the director in the company subject to date of appointment being such date as of allotment of DIN by MCA. This shall save time and efforts involved in taking up the matter to the Board twice.

Conclusion

Definitely, the amendment rules are a step ahead towards ease of doing business in India initiative, however the practicality of the subject will be understood only when the said changes will be implemented by companies. Further, the provisions of law and amendment in the rules contradict each other however, MCA is expected to remove ambiguity and throw light on the subject through some notification.

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