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Reasons for Cancellation / Surrender / Deactivation of DIN

A Director Identification Number (DIN) can be deactivated due to different reasons, and the DIN can also be surrendered voluntarily for the purposes of cancellation or deactivation on certain conditions.  So what are the reasons for cancellation/surrender/deactivation of DIN, or when can it be cancelled/surrendered/deactivated. In this article, we shall answer such queries but before that, let’s have a brief understanding on DIN.

What is a Director Identification Number?

DIN or Director Identification Number is a unique identification number which is allotted by the Central Government to every aspiring individual who wish to be a director of a company. It is allotted by the Central Government and is valid till the lifetime of the director.

According to the provisions of the Companies Act, an individual must have a valid DIN for such person to be appointed as a director in a company. Hence it is pretty apparent that an individual who is already a director will have a DIN already.

What is the use of Director Identification Number?

Director Identification Number can be used to file returns, applications, or any kind of information pertaining to the company before the Ministry of Corporate Affairs^[1]. The director must comply with the essential requirement of the annual KYC within the due date of each financial year.

Deactivation of DIN (Director Identification Number)

As stated at the start of this article, DIN can be deactivated due to different reasons by the Ministry of Corporate Affairs. One of the most common reasons for deactivation of DIN is because of non-compliance with the KYC (Know Your Customers) norms, that has been introduced in the past by the Ministry of Corporate Affairs.

Due to the non-compliance of KYC norms on yearly basis, the MCA can mark the DIN as deactivated due to KYC.

Moreover, deactivation of DIN can also be done in case where the company doesn’t file the annual financials and annual return for a consecutive period of 3 years with the registrar of companies. On occurrence of such instances, the company shall be struck off by the registrar of companies, and DIN of the directors shall remain deactivated.

The Central Government or the regional director of registrar of companies can cancel or deactivate DIN on being satisfied on verification of particulars and documentary proof.

Voluntary surrender of DIN by DIN holder

After the DIN is obtained, in case the individual has never been appointed as the director in a company and the DIN in question hasn’t been used for filing of any documents with any authority, then the Director Identification Number can be voluntarily surrendered for cancelation or deactivation.

In that case, the DIN holder shall be required to file an e-form DIR 5 attaching a declaration with it that he though in possession of the DIN, has never been appointed as a director in any company and that the DIN which is surrendered hasn’t been used to make any communication to any regulatory authority. When the verification is completed by the officials of MCA, it would lead to deactivation of DIN.

It is not always that DIN has to be surrendered only when the order is received by the Central Government, but it can also be voluntarily surrendered by the concerned DIN holder also. Under this route, the process is simple and less time-consuming as opposed to surrendering DIN by the Central Government order. The director who surrenders the DIN should specify the reasons as to why he is surrendering the same.

Duplicate DIN obtained or obtained by Wrongful manner

If the DIN is found to be duplicated in respect of the same person provided, the data pertaining to both the DIN would be merged with the validly retained number.

The provisions of Section 155 of the Companies Act 2013 provides that no individual who is allotted a DIN under section 154 will apply, obtain or possess another DIN. Section 159 provides that in case any individual or director of a company makes any default in complying with the provisions of Section 152, 155, and 156, such individual or director of the company would be liable for a penalty which can extend up to 50 thousand rupees and if the default is a continuing one then with a further penalty that can extend to 500 Rs. for each day after the first during which the default continues.

Surrender application of DIN

Pursuant to section 153 of the Companies Act 2013, the holder of the duplicate/multiple DIN should make an application for its surrender to the regional director concerned by making an application in Form DIR-5 accompanied with a declaration on an affidavit to be notarized.

The affidavit should state that the concerned person has never been appointed as director in any company and that the said DIN has never been used to file any document with any authorities. As the Form DIR-5 is a physical one, it is to be attached in Form RD-1, and the same should be filed with the regional director.

Once Form DIR-5 is filed as attachment in Form RD-1, an application for compounding of offence under Section 441 should be filed in Form GNL-1. Then the concerned authorities for NCLT would pass an order for compounding of offences.

DIN obtained by wrongful manner

Here wrongful manner means if the DIN is obtained on the strength of documents that are not valid legally or incomplete documents are furnished or on suppression of material facts or on the basis of wrong certification or by making misleading information.

If the DIN is obtained by wrongful manner and fraudulent means (with an intent to deceive), then the regulator shall deactivate the DIN after passing an order on deactivation of DIN.

DIN obtained by wrongful manner and fraudulent means is one of the grounds, and the regulator shall issue a show-cause notice to the DIN holder before cancellation or deactivation of DIN. The DIN holder can submit his response to the regulator, and regulator shall provide an opportunity to such DIN holder.

Exceptional circumstances under which DIN should be surrendered

There are certain exceptional circumstances where the Director Identification Number should be surrendered.

These exceptional circumstances include the following:

• DIN holder declared as a Person of unsound mind;
• DIN holder adjudicated as Insolvent; and
• Death of the DIN holder.

Now let’s discuss them one by one.

DIN holder declared as a Person of unsound mind-

If the DIN holder is declared as a person of unsound mind by a competent court, then the DIN should be surrendered by filing of DIR 5 for surrendering the DIN pursuant to section 153 of the Companies Act 2013.

Now here cometh a question in this case, who would file this form since the DIN holder is declared as unsound mind by a competent court. As per the provisions of Companies Act, Form DIR 5 can be filed/digitally signed by a relative of the person. Therefore any of the relative of the DIN holder can file this form for surrendering DIN. The order of the court is an essential condition for it.

 DIN holder adjudicated as Insolvent

When a DIN holder is adjudicated as Insolvent, then also the DIN should be surrendered by filing of Form DIR-5. In this case also, the Form DIR 5 can be filed/digitally signed by a relative of the person. Therefore any of the relative of the DIN holder can file this form for surrendering DIN. If DIN is surrendered as the person is declared insolvent, then again, the court order is essential and should be attached to the form.

Death of the DIN holder

In case of surrender of DIN because of the death of the person, then a copy of death certificate should be attached to Form DIR-5. In case of the death of the DIN holder, the Form DIR 5 can be filed/digitally signed by a relative of the person.

Cancellation/Deactivation of DIN by ROC

Cancellation/Deactivation of DIN by Registrar of Companies can be due to non-compliance.

• Non-compliance of Annual KYC

All DIN holders holding DIN as on March 31 of a financial year should file Form DIR- 3 KYC which is a mandatory annual compliance. This form should be filed on or before September 30 of immediate financial year. On the expiry of the due date for filing DIR-3 KYC, all approved DIN shall be marked deactivated with the reason- “Non filing of DIR 3 KYC” by MCA. The DIN holder will then be required to comply with the KYC norms by paying the prescribed fee, and then only the DIN is approved.

• Company struck off due to failure to file annual returns

The DIN can be deactivated in case the Company fails to file the annual financial statements and annual returns with ROC. The Company’s name will be struck off, and consequently, the DIN of directors will be deactivated.

What can directors do when they are disqualified and upon deactivation of DIN?

When directors are disqualified, and DIN is deactivated, the directors can make an application in Form DIR-10 to the registrar of companies for removal of disqualification, and such application can be made at the end of the tenure of 5 years post disqualification. The Registrar of Companies shall activate the DIN after considering the application made by the director.

When the strike off is done, directors of the company may want to revive the company by removing the disqualification. To remove the disqualification an application should be filed for revival of the company before the NCLT that has administration over the state where the registered office of the company is located. An application can be made within 3 years of strike off.

Upon hearing the petitioner and the respondent, the tribunal shall revive the company if the tribunal is content with reasons provided by the company. If the National Company Law Tribunal denies the revival of the company, then the company can prepare an appeal before the Appellate Tribunal for revival and contest the order issued by the NCLT. 

Conclusion

From the above paragraphs, it is evident that DIN can be surrendered voluntarily, and there are certain exceptional situations where DIN has to be surrendered. Then comes deactivation of DIN, which can happen on non-compliance. Therefore directors should ensure that the compliances to be followed by every company are followed such as reporting of financial results, auditing of accounts, filing necessary forms, etc. Directors are advised to take the assistance of qualified professional and be aware of the legal requirements in order to make timely and adequate compliances.

Read our article:How to Obtain DIN (Director Identification Number)