How to verify a company in India: A best practice approach  

Ebooks , Education

M May 2024 Blog Verify A Company In India

India is a standout destination for business. This robust economy is expected to grow by 6.5% in 2024 and is on track to becoming the third-largest in the world[1], overtaking Japan and Germany. Projections suggest India’s GDP will reach US$5 trillion by 2027 and US$7 trillion by 2030.

The government’s strategy to attract foreign companies, coupled with a consumer base of over 1.4 billion people and competitive operational costs, positions India as an ideal location for business diversification and growth.

However, to fully capitalise on these opportunities, global organisations need to have the right processes in place to ensure they are engaging with legitimate and ethical entities. This requires thorough verification of business, client or merchant backgrounds, both during initial onboarding and through ongoing monitoring. In India, a robust framework of regulations and guidelines supports this process, facilitating effective Know Your Customer (KYC) and Know Your Business (KYB) checks.

How to check if a company is legitimate in India

Business verification plays a crucial role in intercepting and preventing fraud by ensuring that companies are genuine and operate within legal parameters. Essentially, it confirms that these businesses are not shell companies or fronts for illicit activities.

When establishing how to verify a company in India, it’s necessary to check, among other things:

  • Whether company directors and beneficial owners are who they claim to be
  • The validity of a business’s registration details, address and contact information
  • An entity’s compliance with local regulations

Additionally, ongoing monitoring of registered businesses can detect and flag unusual changes that might indicate fraudulent activities, such as sudden changes in company ownership or management, which could suggest attempts to evade legal consequences or commit fraud.

 

Key laws and regulatory authorities governing India’s KYB and KYC ecosystem

  • Prevention of Money Laundering Act, 2022:
    India’s Prevention of Money Laundering Act (PMLA)[2], 2002, requires all reporting entities, such as banks, financial institutions and intermediaries to verify the identity of their clients and the beneficial owners of entities they engage with, by use of specified authentication methods and officially valid documents.
  • Reserve Bank of India’s Master Direction on KYC:
    The Reserve Bank of India’s (RBI) Master Direction on Know Your Customer[3] (KYC) provides guidelines for customer identification and verification practices. It applies to all entities regulated by the RBI, including banks, non-banking financial companies, payment system providers and other financial institutions. Regulated entities must follow detailed customer identification procedures to verify the identity of their customers. This includes obtaining and verifying customer details such as name, address, photograph and other relevant information. For individual customers, regulated entities must obtain proof of identity (e.g., Aadhaar, PAN card) and proof of address. For non-individual customers (e.g., companies, partnerships), entities must obtain documents to verify the legal status, address, and identity of beneficial owners.
  • Securities and Exchange Board:
    The Securities and Exchange Board of India[4] (SEBI), which regulates the securities market in India, issues AML/CFT guidelines for securities market intermediaries, including stockbrokers, depositories and mutual funds. Every SEBI registered intermediary is required to obtain and verify the proof of identity and proof of address from the client at the time of commencement of an account-based relationship.
  • Insurance Regulatory and Development Authority:
    The Insurance Regulatory and Development Authority of India (IRDAI) Guidelines require companies to comply with a set of KYC norms[5], which involves obtaining and verifying the customer’s identity through official documents such as Aadhaar, PAN card and proof of address. This applies to both individuals and juridical persons (e.g., companies) and extends to identifying and verifying the beneficial owners who control or benefit from the entity.

By following these and any other relevant industry regulations and guidelines, businesses can make sure they’re partnering with legitimate clients and companies, protecting their operations and reputation. They will also stay on the right side of regulators, operate within the law and help maintain the integrity of India’s business environment.

How to check company registration in India

Under the Companies Act, 2013, all companies in India must be registered with the Ministry of Corporate Affairs[6] (MCA). Failure to register can result in substantial fines or penalties, which can reach up to Rs. 10,000 per day of default. Additionally, an unregistered company is not recognised as a separate legal entity, making its owners personally liable for any debts or legal issues. Without registration, a company is also unable to enter into contracts, own property or access various funding opportunities.

To verify if a company is registered with the MCA, companies can visit the MCA website[7] and follow a series of manual steps. These include clicking on the “MCA Services” tab and selecting “View Company or LLP Master Data”, inputting the name or Corporate Identification Number (CIN) of the company, filtering companies by their registered office state, status, date of incorporation and more.

Preparing for upcoming changes

India is planning to standardise its KYC process across the financial sector. The government aims to simplify and digitise the process, ensuring uniformity and inter-usability of KYC records. This initiative, driven by the Financial Stability and Development Council (FSDC) and chaired by Finance Minister Nirmala Sitharaman, seeks to streamline KYC verification, which currently varies among banks and financial institutions.

The proposed standardised KYC process will facilitate easier customer verification, reduce duplication, and enhance efficiency in the financial sector. It also aims to combat issues related to unauthorised lending through online applications by preventing illegal lending practices and ensuring better regulatory compliance​.

While the implementation timeline for the new process remains uncertain, companies might consider taking a proactive approach by beginning to digitise their onboarding, verification and monitoring processes for the Indian market now. Embracing suitable technology can drastically reduce time, effort and risk, making it easier to adapt or scale processes to suit business growth or changing requirements.

Preparing for upcoming changes

India is planning to standardise its KYC process[8] across the financial sector. The government aims to simplify and digitise the process, ensuring uniformity and inter-usability of KYC records. This initiative, driven by the Financial Stability and Development Council (FSDC) and chaired by Finance Minister Nirmala Sitharaman, seeks to streamline KYC verification, which currently varies among banks and financial institutions.

The proposed standardised KYC process will facilitate easier customer verification, reduce duplication, and enhance efficiency in the financial sector. It also aims to combat issues related to unauthorised lending through online applications by preventing illegal lending practices and ensuring better regulatory compliance​.

While the implementation timeline for the new process remains uncertain, companies might consider taking a proactive approach by beginning to digitise their onboarding, verification and monitoring processes for the Indian market now. Embracing suitable technology can drastically reduce time, effort and risk, making it easier to adapt or scale processes to suit business growth or changing requirements.

How AsiaVerify can help

AsiaVerify offers a best-in-class business, customer and UBO verification solution for India. The technology behind AsiaVerify streamlines KYB, KYC and UBO processes for clients, ensuring they know exactly who they are doing business with.   

Our system is enhanced with advanced machine learning and AI, enabling real-time searches that save time and expand the scope for detecting irregularities and eliminating blind spots effectively. 

With direct connections to government registries and other official sources within India, AsiaVerify guarantees that all decisions are based on the most accurate and up-to-date information available. Clients gain immediate access to billions of primary source documents, fully translated and available in real-time, ensuring clarity and compliance in all business interactions.

Conclusion

Understanding how to verify a company in India and how to check if a company is registered in India is an indispensable part of establishing strong commercial partnerships in this opportunity-rich market.

For more information on how to conduct real-time company checks in the Asia-Pacific, including how verify a company in Australia and how to verify a Thai company, email our team at [email protected]

[1] https://www.businessgo.hsbc.com/en/article/why-do-business-in-india
[2] https://fiuindia.gov.in/files/AML_Legislation/pmla_2002.html
[3] https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11566#11
[4] https://nsdl.co.in/downloadables/pdf/2023-0146-Policy-SEBI_Master_Circular_on_Know_Your_Client_(KYC)_norms_for_the_securities_market.pdf
[5] https://irdai.gov.in/documents/37343/991172/Annexure+A-AMLCFT01062022.pdf/7dfe52ca-8417-c621-c74b-a74371a8980a?version=1.0&t=1654093197848&download=true
[6] https://mca.gov.in/content/mca/global/en/home.html
[7] https://www.mca.gov.in/content/mca/global/en/home.html
[8] https://www.indiatoday.in/business/story/standardised-kyc-verification-process-across-financial-sector-banks-nbfc-2505328-2024-02-21

Merchant verification in the fast-lane

Merchant verification in the fast-lane

read article >

M May 2024 Blog Fast Forward How The Fusion Of Automation And Expertise Is Revolutionising Merchant Onboarding

Fast Forward: How the Fusion of Automation and Expertise is Revolutionising Merchant Onboarding

read article >

M April 2024 Blog The Future Of Kyb Compliance Embracing Automation And Real Time Insights (1)

The Future of KYB Compliance: Embracing automation and real-time insights

read article >

Asia is open for business: The value of tech-driven compliance 

Asia is open for business: The value of tech-driven compliance 

read article >