Tracking by Numbers
On 22 June 2020, royal assent was given to the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth)[1] (the Registries Modernisation Act) which introduces a legal framework requiring company directors to hold a Director Identification Number.
What is a Director Identification Number?
A Director Identification Number (DIN) is a unique identification number for each eligible individual, which once issued, will remain with that individual for all directorships.
An ‘eligible officer’ of a company, a registered Australian body corporate or registered foreign company, will need to apply for a DIN. An ‘eligible officer’ is someone appointed to the position of director, or as alternate director and is acting in that capacity, or any other officer that is of a kind prescribed by the regulations.
So, this will apply to all current and new company directors. The DIN regime will ensure that the holder of a DIN is identified by their true identity and will allow traceability of directors’ relationships with different companies over time.
The DIN will be kept for life.
What is the DIN regime hoping to achieve?
The creation of the DIN regime reflects the federal government’s increased scrutiny of corporate governance in the wake of Commissioner Hayne’s 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry[2].
The introduction of the regime will complement the government’s combatting illegal Phoenixing reforms[3] introduced earlier this year to curb creditor-defeating disposition transactions by preventing director identity fraud, a practice commonly seen in illegal Phoenixing activity.
The Registries Modernisation Act is the latest legislative development in the federal government’s Modernising Business Registers (MBR) Program[4] which will consolidate the Australian Taxation Office’s (ATO) Australian Business Register (ABR) and 31 business registers currently administered by the Australian Securities and Investments Commission (ASIC) into a centralised business register system in order to improve the efficiency of registry services. ASIC will retain its regulatory functions and powers.
The Explanatory Memorandum to the bill for the Registries Modernisation Act also notes that the simpler tracking of directors and their corporate history enabled by the Director Identification Number regime should increase efficiency in the insolvency process by reducing time and cost for administrators and liquidators.
When will the Director Identification Number regime begin operating?
The DIN regime is expected to be implemented in the first half of 2021.
However, there are a number of factors which may delay this optimistic estimate.
The task of consolidating the ATO’s Australian Business Register with the 31 registers currently administered by ASIC may prove to be logistically difficult given the volume of data involved. Implementation could also be delayed by shifting government priorities during the federal government’s management of the continuing COVID-19 public health and economic crisis.
Nevertheless, the regime is due to be in operation by 2022.
Timelines
After the DIN regime begins operating, there will be a transitional application period of 12 months during which existing directors will need to apply within the period of time to be prescribed by the Registrar, with oncoming directors required to apply within 28 days of their appointment.
After the transitional application period, new directors will be required to register prior to being appointed or within any later period provided by the Registrar or the regulations.
Non-Compliance will have bite
A person who fails to comply with the requirements to apply for and hold a Director Identification Number within the prescribed period will be subject to civil penalties and criminal liability under the Corporations Act 2001.
Applying for additional Director Identification Numbers or misrepresenting Director Identification Numbers will also attract civil penalties and/or a maximum of 1-year imprisonment.
Key takeaways
Companies will need to amend their procedures to incorporate identity verification and Director Identification Number registration or else companies risk exposing their directors to civil penalties and criminal liability and delaying the appointment of new company directors.
If you have questions in relation to compliance with the Director Identification Number regime, or require advice on director duties, please do not hesitate to reach out to a member of Coleman Greig’s Commercial Advice team, who would be more than happy to assist you.
Disclaimer; This information is for information purposes only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. Please contact us if you wish for us to advise you on any issue you may have in your circumstances.
