In the not too distant future, Australia will introduce a brand-new regime for tracking company directors.
The broad objective of the regime is to combat illegal phoenix activities and to make directors more accountable in their roles.
Phoenix activity is the process of transferring the assets of a distressed company into another company and in doing so, avoiding paying liabilities and defeating creditors’ interests.
In December 2019, five (5) Bills were reintroduced into the House of Representatives, being:
- the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019;
- the Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019;
- the National Consumer Credit Protection (Fees) Amendment (registries Modernisation) Bill;
- the Commonwealth Registers Bill 2019; and
- the Corporations (Fees) Amendment (registries Modernisation) Bill 2019.
All five (5) Bills passed through both Houses of Parliament without amendment on 12 June 2020, to create the Commonwealth Registers Act 2019.
Essentially, the new legislative package does two (2) things:-
- Creates a new Commonwealth Business Registry regime to be run by the ATO, which will centralise and modernise business registers; and
- Introduces a Director Identification Number (“DIN”) requirement for all directors of Australia corporations.
Director Identification Number – Impact on Business
The DIN is a unique identifier for each person who consents to be a director, which they will keep permanently even if they cease to be a director. It is not intended that a person’s DIN will ever be re-issued to someone else or that one person will ever be issued with more than one DIN (except in limited circumstances such as when a record is corrupted).
Once the new requirements have become effective, a person will be required to apply to the Registrar for a DIN and confirm their identity before they are appointed as a director. In the event that the Registrar is satisfied that the director’s identity has been established, the Registrar must provide the director with a DIN. Existing directors at the date the new requirements commence, will be required to obtain a DIN.
Transitional provisions will apply in relation to directors already appointed when the new requirement commences. Furthermore, a person who is appointed a director within the first twelve (12) months of the new requirements commencing, will be required to apply for a DIN within twenty-eight (28) days of being appointed as a director.
Once a DIN is obtained, the director will keep it permanently, even if they cease to be a company director.
The resignation of a director will only take effect from the date the resignation is notified to ASIC and a director who fails to notify ASIC of their resignation can be held to account.
Both civil and criminal penalties will apply for a director applying for multiple DINs, failing to apply for a DIN within the applicable time frame or misrepresenting a DIN.
When are Director Identification Numbers coming in?
The Australian Financial Review reported on 16 June 2020 that the new DIN system was expected to be introduced in the first half of 2021. However, with the impacts of COVID-19 diverting resources elsewhere, together with the impending administrative and logistical nightmare of combining the ATO’s Australian Business Register with thirty-four (34) existing ASIC business registers, the task of getting the DIN system up and running will no doubt be an expensive and time-consuming exercise. That being said, the DIN regime will be operational by 2022.
It is essential that directors and companies be aware of these impending changes and take necessary steps ahead of time to ensure compliance before the legislation takes effect.
Watch this space for further updates on when this new regime will commence.
An Important Message
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