Companies Act Section 158

Companies Act Section 158: Obligation to Indicate Director Identification Number (DIN)

Section 158 of the Companies Act, 2013 introduces a key requirement for individuals and companies to indicate the Director Identification Number (DIN) when providing specific returns, information, or particulars required under the Act. This provision ensures that any returns or filings which reference a director or relate to a director, must include the DIN of the respective director.

The DIN is a unique identification number allotted by the Central Government to individuals intending to become directors of companies. The purpose of this provision is to enhance transparency, prevent fraud, and maintain accurate records of directorial appointments in the corporate sector. By requiring the DIN to be indicated in returns or documents that pertain to a director, Section 158 helps the Registrar of Companies (RoC) maintain comprehensive, accurate, and verifiable records of all directors involved with companies.

1. Requirement to Furnish Director Identification Number (DIN)

Under Section 158, every individual or company is legally obligated to indicate the DIN of the director in various filings or returns that relate to a director. This requirement applies when the return, information, or particulars being furnished pertain to the director in question or if there is any reference to the director within the document.

a. Types of Returns and Information Covered

This requirement applies to a broad range of documents and filings that companies are required to submit under the Companies Act, 2013. These could include:

Annual returns filed by the company.

Financial statements submitted to regulatory authorities.

Documents related to directorial appointments or changes in the board of directors.

Resolutions and forms that mention or involve a director.

Compliance filings, such as Forms MGT-7, DIR-12, or others that provide details of directors.

For example, when a company files its annual return, it must ensure that the DIN of all the directors is mentioned in the relevant sections. Similarly, when there is a change in the board of directors, such as an appointment, resignation, or removal, the DIN of the director involved must be included in the relevant documentation submitted to the Registrar.

b. Scope of Reference to Director

The provision extends to any return, document, or information that mentions a director or includes a reference to a director, even if the director is not the main subject of the document. This broad scope ensures that the DIN is incorporated into all corporate records where the director's identity is relevant.

For example, a company submitting a shareholder’s resolution or a board resolution regarding the appointment of a new director must include the DIN of that newly appointed individual. Additionally, if there is any mention of a director in a public filing, such as in connection with transactions or corporate governance details, the DIN must be cited.

2. Importance of Furnishing the DIN

The inclusion of the DIN in such returns, information, and documents serves multiple purposes in the corporate governance ecosystem.

a. Facilitating Transparency and Accountability

One of the primary reasons for requiring the DIN to be furnished is to improve transparency in the corporate sector. By associating a unique DIN with each director, the Registrar of Companies (RoC) can accurately identify and track the directors of any company. This helps prevent fraudulent practices, such as individuals holding multiple director positions under different aliases, and enhances the ability to monitor directorial appointments effectively.

b. Regulatory Compliance

The DIN requirement is essential for regulatory compliance, allowing authorities to quickly verify the identity of directors when reviewing corporate filings. This ensures that all director-related filings are correctly associated with the appropriate individuals, which is vital for enforcement of regulatory standards, audits, and investigations. It also makes it easier for stakeholders, including investors and auditors, to verify the credentials of the directors associated with a company.

c. Accuracy in Record-Keeping

Maintaining accurate and up-to-date records is a critical aspect of corporate governance. By ensuring that DINs are included in all relevant returns and filings, the Registrar can maintain an accurate database of directors, which helps in the verification of directorial roles and their responsibilities within a company. This reduces the likelihood of errors, omissions, or potential misunderstandings regarding the composition of a company's board.

3. Consequences of Non-Compliance

While Section 158 sets out the requirement for companies and individuals to include DINs in relevant returns and filings, it also implies that failure to comply with this requirement could have legal implications.

a. Penalties for Non-Compliance

If a company or individual fails to include the DIN in filings where it is required, they may face penalties as prescribed under the Companies Act, 2013. The specific penalties can vary depending on the nature of the non-compliance and whether it results in a delay or inaccurate filing. Failure to provide accurate and complete details, including DINs, could result in the rejection of the filing by the Registrar or further actions under the relevant provisions of the Act.

b. Effect on Corporate Filings

Non-compliance with this provision could also lead to delays or complications in regulatory approval processes. Filings with incomplete or incorrect information, including missing DINs, may be considered incomplete by the Registrar and could result in delays in approvals, penalties, or additional fees. Moreover, such discrepancies could reflect poorly on the company’s governance practices, which may harm its reputation or trustworthiness in the eyes of investors, regulators, or other stakeholders.

4. Impact on Corporate Governance

Section 158 plays an important role in enhancing corporate governance practices by ensuring that there is proper identification and documentation of directors. By linking the DIN to the director, the provision creates a reliable and verifiable system for tracking individuals in directorial roles across multiple companies.

a. Strengthening Governance Frameworks

This provision supports the overall corporate governance framework by facilitating transparency and accountability in the corporate sector. It ensures that every filing made by the company correctly identifies the directors, reinforcing the integrity of the company’s governance processes. The inclusion of the DIN helps ensure that all directors are properly accounted for, and their actions are traceable and transparent.

b. Prevention of Fraudulent Practices

The requirement also plays a critical role in preventing fraudulent practices within the corporate sector. By mandating that all returns and documents involving directors contain the DIN, the law aims to prevent individuals from holding multiple directorial positions under different identities. This requirement discourages fraudulent activities, such as directors using multiple identities to conceal their role or avoid accountability.