Australia will soon introduce a new regime to track all directors, from our largest listed companies to our smallest family trustee companies. On 22 June 2020, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (Cth) received Royal Assent. This bill will, among other things, amend the Corporations Act 2001 (Cth) to introduce a Director Identification Number (DIN) regime. The broader objective is to curb illegal phoenix activities and make company directors more accountable and traceable.
Phoenix activity is the process of transferring the assets of a distressed company into another company, thereby avoiding paying liabilities and defeating creditors’ interests.
What is a DIN?
A DIN will be a permanent unique identifier for each person who consents to be a director. The DIN will remain allocated to a person even if they cease to be a director. It is intended that the DIN will provide transparency into the conduct of a director across companies and will prevent the use of fictitious identities.
Who must apply?
Under the new regime, a director, alternate director or any other officer of a prescribed registered body must apply for a DIN before their appointment. As a transitional requirement, and only for the first 12 months of operation, the newly appointed directors will be given 28 days from the date of their appointment to apply for a DIN. Otherwise, company directors will be expected to apply for a DIN prior to their appointment.
Existing company directors will also be required to apply for a DIN, although the timeframe within which they need to apply is yet to be disclosed.
A DIN will be issued only after the identity of the director has been established by ASIC.
The new regime is currently not in operation, and proclamation of a commencement date is expected to be in 2021.
- Directors will need to apply for a DIN, which will serve as their permanent unique identifier.
- The DIN is intended to provide improved director traceability by keeping a record of failed companies, suspicious activities and possible fictitious identities.
- For those who do not have a DIN, the need to apply for one and go through the process of verification of identity will mean that the incorporation of companies can take more time.
- A streamlined single business register with a strict verification process will provide the regulatory authorities with better access to information and the necessary tools to curb potential illegal phoenix activities.
- Under the Corporations Act 2001, criminal and civil penalties can apply for non-compliance. If a person applies for multiple DINs or misrepresents a DIN in order to carry out an unauthorised activity, penalties of up to 12 months’ imprisonment can apply.
For further information please contact an author or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.