Earlier this year the Australian parliament passed a package of legislation designed to centralise Australian business registers. Notably, Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth) (the Act) introduces the requirement for all directors of Australian corporations to apply for, and permanently hold, a unique Director Identification Number (DIN).
Under this new initiative, every individual who holds the position of director for an Australian corporation or registered foreign corporation, will be required to confirm their identity and obtain a DIN. The Act provides that a person who is a director immediately before the provisions take full effect will have to obtain a DIN within the time frame to be specified by the Minister. For persons who are first appointed after that date, there will be a transitional period of 12 months during which the person must obtain their DIN within 28 days after appointment, and after the end of the transition period, a person will need to obtain their DIN before their first appointment. The commencement date is yet to be set, but it will be not later than 22 June 2022, and could be as early as the first half of 2021.
The new regime is designed to increase director accountability and traceability, substantially limiting the potential for fraudulent activity and ‘phoenixing’ (where directors of a company wind up a company to avoid paying its liabilities and incorporate a new company to carry on substantially the same business). The regime is expected to have other benefits such as increasing the accessibility of important information that may assist administrators and liquidators. It is anticipated that the public will be able to search the registry and view a director’s profile, including any historic relationships with different companies. For example, if the director has had past involvement with insolvent trading, that information will be available on the registry.
Existing regulatory and enforcement functions of ASIC will not be impacted by the new regime. The Act introduces both civil and criminal penalties for a failure to apply for a DIN within the required time frame. There are criminal penalties for deliberately providing false identity information or a false DIN to a government body and intentionally applying for multiple DINs. The Act gives the registrar the power to issue infringement notices in relation to such conduct.
The procedures and identity documents required to obtain a DIN are not included in the Act, rather they are expected to be set out in a separate legislative instrument in the coming months. The registrar will have the power to issue DINs (once satisfied of a director’s identity) and the responsibility of recording, cancelling or re-issuing DINs. The Administrative Appeals Tribunal will have jurisdiction to review decisions made by the registrar.
The administrative changes introduced by the Act may have practical implications when appointing directors on an urgent basis. For this reason, businesses need to be aware of the coming changes so they will be ready to implement procedures to ensure compliance with the law and the timely appointment of directors.
This article was co-written by Law Graduate, Madeline Tait.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.