Australia introduces Director Identification Number

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Are you a company director, director of the corporate trustee of your family trust or a member of a management committee of registered bodies such as incorporated associations that is registered under the Corporations Act? If yes then you need to know the following.

In June 2020, the Australian Government passed Bills to amend the Corporations Act 2001 to introduce a ‘Director Identification Number’ (DIN).

The new law will require persons appointed as directors to apply for a Director Identification Number prior to being appointed as a director.  The person will keep that Director Identification Number permanently, even if they cease to be a director. 

Persons appointed as directors within 12 months of the new regime’s operation will have 28 days to apply for a Director Identification Number.

Those persons that are currently directors will also be required to apply for a Director Identification Number; however, they will not be required to do so until the Minister so specifies (by legislative instrument). Current directors should therefore remain on alert for announcements from the Minister’s office in this respect.

Why has this been introduced?

These measures are aimed to assist regulators to investigate unlawful corporate activity including ‘phoenix activities’.

Phoenixing is where a company director may close an entity that is insolvent and transfer the assets to a new company to avoid debts and liabilities.

DIN will be used to help reduce fraud and illegal activities.

A DIN also helps to prevent the creation of false identities and allows tracing of a director’s previous involvement with any insolvent companies.

Things you should know

  • – Directors are only allowed to have one DIN even if multiple companies.
  • – The ATO will be the operator of the new commonwealth register.
  • – The DIN scheme will remove personal/sensitive information from the registry i.e. home addresses- a welcomed measure.
  • – You will have to make an application prior to acting as a director if you are going to be a new director of a company for the first time. The transitional period will enable you to apply for a DIN within 28 days of your appointment to the Board.
  • – Existing directors must apply within a timeframe specified by the Registrar.
  • – The DIN regime will also apply to:
    • acting alternate directors.
    • management committee members of registered bodies such as incorporated associations with an Australian Registered Body Number who are registered under the Corporations Act.
    • directors of foreign companies registered in Australia.
    • Aboriginal and Torres Strait Islander corporations. 

Consequences if you do not apply for a DIN

There will be heavy penalties if a director does not apply or provides false or misleading information to obtain a DIN.

However, once the regime commences, there will be a 12-month transition period in place.

When will I need a DIN?

The commencement date is not yet set and still to be confirmed however it is expected that this new law will commence early 2021.

Director Obligations

This latest legislation should also act as a reminder to anyone who is a director or is contemplating being a director that there are many requirements in being a director the most common of which are your fiduciary duty to act for all shareholders, to act honestly and to ensure the company complies with all its obligations.

Directors found breaking the rules in these areas can face severe penalties including jail.

Directors can also be personally liable in instances of fraud, allowing a company to continue operating if insolvent and to pay tax related obligations including withholding tax, GST and superannuation guarantee.

Personal liability also extends in the area of Occupational Health and Safety.

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