About 4 lakh out of a total of the country's over 11 lakh 'active' companies have so far complied with the new know-your-company (KYC) norms mandated by the Ministry of Corporate Affairs (MCA). Meanwhile, the deadline for complying the new disclosure norms has been extended till June 15 from April 25 earlier.

On February 25, the MCA introduced the KYC norms to help it track down bogus or shell companies as well as to ensure timely compliance by firms. The companies registered till December 2017 have to file the new KYC e-form ACTIVE (Active Company Tagging Identities & Verification), also known as INC 22. The form requires firms to upload photographs of the registered office and that of a director. As many as 11.35 lakh companies were active in the country as on December 31, 2017, according to the government data.

"There may be companies which will need more time to complete all the filings mandated under the new disclosure norms. We have given them more time. If they don't do it within the stipulated time, such firms will be labelled as non-compliant by the government," said a senior government official.

"Compliance has picked up during the last couple of days with about 50,000-60,000 companies coming forward to comply on the last day. We understand the companies need time because it is not a question of merely filing one form. You have to be 100% compliant with all other mandatory filings such as financial statement, annual returns as well as information on Board of Directors, auditors and companies secretaries.

The government expects that about 7-7.5 lakh companies will come forward to comply out of a total of around 11.35 lakh.

In case a company fails to file the form within the stipulated time, it will be allowed to complete the KYC process after the expiry of the deadline upon payment of Rs 10,000 in order to become compliant with the new rule.

"Though such companies will not be deactivated, they will be barred from carrying out regular compliance functions," the official said. This includes changing their authorised capital, paid-up capital, registered office or their directors. Such 'ACTIVE-non-compliant' companies will also not be allowed to undergo amalgamation and demerger. The action will be taken under sub-section (9) of section 12 of the Companies Act, 2013.

To be compliant with the latest rule, the photograph of the registered office showing external building and the office interior has to be uploaded with the four-page form. The picture should also show at least one director or key management personnel who has affixed a digital signature to this form. The company has to also provide details of its directors, chief executive officer, chief financial officer, auditor, cost auditor, and company secretary.

The form, however, will not be available for the companies which haven't filed their financial statements or annual returns or the ones which have been struck off. The move is aimed at checking the creation of shell or bogus companies. A total of 3.38 lakh shell companies have been deactivated after they failed to file annual returns for a period of two years in a row.

There have been instances where the addresses mentioned by the companies in their filings have been found to be bogus. The new norms requiring them to upload location pictures of the offices along with the form will help the government verify the existence of such companies. Experts feel that about 30-40% of the total companies are not maintaining their registered office.

"The companies will have to do the KYC compliance every year. The entire process is being made quite simple. There will be a pre-filled form. So, if the details provided by a company during this year don't change next year, the KYC process can be completed simply by putting a digital signature on the form. Also, we may allow any director to sign the form instead of the present requirement an auditor signing it," the first official said.

The MCA had launched a similar exercise for non-compliant directors in October. Under this, only 14 lakh directors out of a total of 32 lakh filed 'DIR-3 KYC' form for directors before the cut-off date for filing the form. The ministry subsequently deactivated around 18 lakh Director Activation Numbers (DINs) of the directors.

TIGHTENING NOOSE

• The government expects that about 7-7.5 lakh companies will come forward to comply out of a total of around 11.35 lakh  
• A total of 3.38 lakh shell companies have been deactivated after they failed to file annual returns for a period of two years in a row  
• The MCA had launched a similar exercise for non-compliant directors in October