Australian company directors may soon be required to obtain a unique, individual identifier under a new bill before parliament. If passed, the implementation of the Director Identification Number (“DIN”) scheme should see a significant reduction in illegal phoenix activity and the use of false identities – enabling director traceability and increasing transparency of directors that fail to comply with the required obligations of their role.
What Does this Mean for Directors?
If implemented, all directors of a body corporate registered under the Corporations Act will be required by law to:
- register for a DIN within the transitional time frames if an existing director; and
- persons seeking to become a director once the Bill is assented:
- in the first 12 months of its operation, within 28 days of being appointed; and
- after the first 12 months, prior to appointment, unless exempted by regulations or provided with an extension by the registrar who oversees the regime.
The registrar will provide a director with a DIN if they are satisfied that the director’s identity has been established.
What is a DIN?
A DIN is a unique, individual identifier that a director will be required to obtain. Once a person is granted a DIN, it will remain with them even if they cease to be a director.
What Happens if you are a Director who Does not Obtain a DIN?
If the Bill is passed, there will be civil and criminal penalties for those who fail to obtain a DIN within the timeframes mandated.
The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 has been introduced into the House of Representatives, proposing to amend the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (“CATSI”). Currently, the Bill is before the House of Representatives.
This new identifying system was proposed in 2018 however lapsed in April 2019 with the dissolution of Parliament for federal election. The new Bill forms part of a package of reforms which the Government is seeking to gain assent for.
Purpose of the DIN
Requiring directors to obtain a DIN will ensure all directors are traceable and therefore will allow greater transparency and tracking of directors that fail to meet regulatory requirements or perform their role and responsibilities properly. Further, DINs will ensure all directors’ identities are known, thus reducing unlawful activity including illegal phoenix activity. Illegal phoenix activity occurs when a director shuts down their company to then create a new company in an attempt to avoid debts and liabilities. This results in creditors; employees and the Australian economy at large being negatively affected.
If the Bill is passed, Sophie Grace will be able to assist directors to apply for a DIN. For more information please contact us.