Companies Act Section 156

Companies Act Section 156: Director to Intimate Director Identification Number (DIN)

Section 156 of the Companies Act, 2013 lays down the requirement for all existing directors to inform the company or companies where they hold directorship about their Director Identification Number (DIN). This provision ensures that the companies can update their records to reflect the official identification number of each of their directors. The DIN is a unique identification number issued by the Central Government to individuals intending to act as directors of a company. It serves as an essential tool for regulating and tracking individuals in directorial roles across different companies.

1. Obligation to Intimate DIN to the Company

Under this section, every existing director who has already been allotted a DIN by the Central Government is required to intimate or notify their Director Identification Number (DIN) to the company or all companies in which they hold directorial positions. The intimation must be done within one month from the receipt of the DIN.

This provision ensures that the companies can maintain an up-to-date record of all the directors and their respective DINs. As DIN is a unique number allotted to individuals serving as directors, it is important for companies to have accurate and complete records for regulatory, compliance, and governance purposes.

The process of intimating the DIN to the companies is a legal requirement under the Companies Act, and failure to comply can lead to penalties or consequences under the Act. This requirement helps in improving transparency, verifying the identity of directors, and streamlining the management of company records.

2. The Time Frame for Intimation

The Companies Act, 2013 stipulates a clear time frame within which the intimation must take place. Existing directors who have already been allotted a DIN by the Central Government are obligated to notify the company within one month of receiving the number. This ensures that there is no delay in the updating of the company’s director records.

The purpose of this one-month period is to give sufficient time to the directors to inform the company about their DIN after its receipt from the government. It is important for companies to stay compliant with the legal provisions and maintain the most current and accurate records of their directorial appointments.

3. Importance of Intimating DIN to the Company

There are several reasons why this provision is crucial for effective corporate governance and regulatory compliance:

a. Regulatory Compliance

The Director Identification Number is an essential regulatory tool used by the Ministry of Corporate Affairs (MCA) and other authorities to track and monitor the involvement of individuals in corporate management. By ensuring that directors notify their DIN to the company, the law guarantees that companies comply with the regulatory framework, making it easier for authorities to verify the identities and background of directors.

b. Updating Company Records

It is imperative for companies to maintain up-to-date records of their directors. By receiving the DIN from directors, companies can ensure that their director registers reflect the correct identity and other relevant details about the directors. This is critical for any audit, compliance check, or legal inquiry related to the company’s governance.

c. Preventing Identity Fraud

The process of intimating the DIN helps to prevent the misuse of names, ensuring that no individual uses multiple identities or engages in fraudulent activities. The DIN system plays a vital role in deterrence of such practices. The process also ensures that an individual is correctly identified in relation to their role in a company.

d. Transparency in Corporate Governance

This requirement promotes transparency within the company. Directors are responsible for updating their director details, including their DIN, which makes it easier to ensure that proper corporate governance practices are being followed. Having accurate records of directors helps create a transparent structure, wherein each director is accountable for their actions.

4. Notification to All Companies Where the Director Holds Directorship

The obligation of the director is not limited to just a single company. If the individual is serving as a director in multiple companies, the DIN must be intimated to all companies where they hold directorships. This ensures that each company has an accurate record of the directors who are responsible for managing its operations.

This requirement is especially important for individuals holding directorships in multiple entities, as it enables each company to track the directors and ensure that all their details are correctly maintained across the board. This also reduces the possibility of discrepancies or omissions in the records held by the respective companies.

5. Consequences of Non-Compliance

Failure to comply with the requirement of intimating the DIN to the company within the prescribed time frame may result in penalties for the director under the provisions of the Companies Act. While the Act does not specify the penalty for non-intimation directly under this section, the company’s failure to update its records accurately can lead to non-compliance with other sections of the Act, potentially attracting legal consequences for the company as well.

a. Penalties

If a director fails to notify their DIN within one month, they may be subject to a penalty or face disciplinary action under the Companies Act. The company may also be required to amend its records to include the correct DIN details.

b. Disqualification of Directors

Failure to comply with regulatory requirements such as intimating the DIN could lead to disqualification of the director from holding office if other legal requirements are not fulfilled, or if it is determined that the director’s failure to notify their DIN is part of a larger failure to meet the legal obligations set forth by the Companies Act, 2013.

6. Procedure for Intimating DIN

The procedure for intimating the Director Identification Number to the company is straightforward. Upon receiving the DIN from the Central Government, the director must send a written communication to the company, detailing their DIN and any other necessary details required by the company for updating their records.

In addition to the written intimation, some companies may require the director to complete certain forms or submit the DIN electronically to ensure that the information is recorded accurately in the company’s records. The company then updates the director database maintained by the company and files necessary forms with the Registrar of Companies (RoC).