Article prepared by Georgia Baade, Lawyer at SP&G Lawyers
Company directors will soon be required to obtain a unique Director Identification Number as part of a suite of measures passed by the Federal Parliament on 12 June 2020.
The Commonwealth Registers Bill 2019 and Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 were introduced as part of the Federal Government’s efforts to prevent phoenixing.
‘Phoenixing’ occurs when company directors deliberately evade liabilities by shutting down an indebted company and transferring its assets to another company. The effect is, more often than not, creditors are left out of pocket and employees miss out on wages and superannuation entitlements.
In order to better track companies and their officeholders, the legislation establishes a new Commonwealth business register which consolidates some thirty-five (35) existing registers, including the Australian Business Register and the ACN register.
As part of this new scheme, directors will be required to obtain a ‘Director Identification Number’ or ‘DIN’. The DIN is a unique identifier which will only be issued after an individual has confirmed their identity. Once issued, DINs are retained permanently, even if the individual to which it corresponds ceases to be a director.
The objective is to prevent the appointment of ‘dummy directors’, where a company is incorporated with an unwitting or even fictitious individual as director to mask the identity of its true controller.
This new regime is not yet operational as administrative arrangements to support the new regime are not yet in place. The requirement to apply for a DIN will commence on 23 June 2022 or an earlier date proclaimed by the Governor-General.
Here’s what the changes might mean for you:-
- If you are already a company director, you will need to apply for a DIN once this scheme is rolled out. The timeframe in which to apply will be defined by a legislative instrument to be made by the Minister but there are transitional arrangements providing an extra twenty-eight (28) days for an existing director to apply.
- If you are intending to assume the office of company director, you must apply for a DIN before being appointed. The legislation requires that all directors have a DIN but it is a defence if a director has applied for a DIN prior to assuming the role and the application has not yet been resolved.
It is important to ensure you comply with your legislative obligations. There are significant civil and criminal penalties for contravention; for example, if you fail to apply for a DIN during the relevant period, the maximum criminal penalty is $12,600.00 and the civil penalty is the greater of $1,050,000.00 or three times the benefit derived or detriment avoided because of the contravention.
If you would like more information about your obligations as a director or prospective director, the ASIC website (https://asic.gov.au/) provides a range of information about directors’ duties. If you require any assistance with applying for a DIN, or as a director generally, Short Punch & Greatorix Lawyers can assist you. Our details are located in the ‘Contact’ section of our website; please do not hesitate to contact us.