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MCA 21 and company directors

Identification numbers are the responsibility of directors

THE MCA 21 project, envisaging electronic filing of documents and paperless administration pertains only to Registrar of Companies offices as stipulated in the Companies Act (the Act). It is already in operation in Coimbatore and a few other centres while the entire country was scheduled to be covered by April end.

This article touches only on stipulations in the MCA21 that affect company directors, namely DIN (director's identification number), and digital signatures.

Director's identification number

Companies have to apply for and obtain the DIN for all existing directors and persons to be appointed as directors. Legally it is the individual director's responsibility but in practice the companies concerned will have to do the requisite paper work.

DIN is mandatory even for directors who are not Indian citizens. However, a person needs to have only a single DIN though he may be a director of more than one company. Directors of foreign companies having branch offices in India do not require a DIN. The authority to whom applications for DIN have to be submitted has been indicated. No fee is payable.

On allotment of DIN, a director has to intimate the companies concerned within a month and the companies, in turn, have to inform the ROC within a week of such advice from the director.

Penalties, mercifully only fine and no imprisonment, have been prescribed for directors not applying for DIN, not intimating the companies concerned of such allotment and the companies failing to furnish the ROC with such information. The onus is on the director concerned and not on the company.

Digital signatures

Electronic records are to be authenticated by affixing a digital signature (DS). This is to be done by the use of "asymmetric crypto system and hash function which envelop and transform the initial electronic record."

The following four categories of users are required to obtain digital signature certificates (DSC): (a) professionals like practising company secretaries, chartered accountants, cost accountants and lawyers who will be required to attest documents, (b) directors and other authorised signatories of companies such as company secretaries, (c) representatives of banks and financial institutions, and (d) MCA employees concerned.

A few certifying authorities have been designated to issue DSCs. Their services will not come free. A DSC will be valid for a maximum two year period and will have to be renewed thereafter. A DSC will also have to be registered with the MCA 21 portal. The charge of Rs. 1,995, to be exact, for issuing a DSC valid for one year looks excessive, especially for young entrants to the professional field. This, coupled with the ill-advised move of the Institute of Company Secretaries of India to enhance its fees for members, may discourage many aspirants for DSCs.

Securities aspect

Many benefits have been claimed for the project such as speedier and more productive work by ROC staff, avoidance of visits to ROC offices and better control on directors. However, a drawback with security implications is the scope for hacking the MCA portal and problems of computer contaminant and computer virus.

E-filing of documents with the ROC may not stand legal scrutiny in view of the mandatory provision in the Act to the effect that "a document may be served on a Registrar by sending it to him at his office by post under a certificate of posting or by registered post, or by delivering it to, or leaving it for him at, his office" (Section 52).

S. Balakrishnan

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