There are important changes for Australian company directors with the introduction of a director identification number (DIN) requirement which was passed into law during April 2021.
First announced in September 2017, the DIN forms part of a broader regulatory strategy to deter and penalise illegal phoenix activity. DINs are one such initiative in response to the issue of phoenixing – where controllers of a company deliberately avoid paying liabilities by shutting down indebted companies and transferring assets to another company.
The DIN will require each person – including current and future directors – to confirm their identity, with each being issued a unique identifier, which remains with the person indefinitely, even if/when they cease to be a director.
The aim is to provide traceability of a director’s relationships across companies and prevent fraudulent and fictitious identities, and to support regulators and external administrations in uncovering illegal phoenix activity.
For the new DIN requirement to apply to a person, the person must be a director of a registered body. Directors must also have their identity verified and apply for a DIN within a prescribed period, and are only permitted to have one DIN, even if they are directors of multiple companies. Importantly, failure to comply with the requirements risks infringement notice and civil and criminal penalties.
The Commissioner of Taxation has been appointed as the Commonwealth Registrar (the Registrar). The Australian Business Registry Services is currently testing the DIN system with a controlled number of existing directors. Testing is expected to be completed by 31 October 2021, at which time, the transitional period will begin and be in place until 30 November 2022.
Existing directors are required to obtain a DIN before the end of the transitional period (30 November 2022). Directors of Indigenous corporations will have until 30 November 2023.
Directors appointed during the transitional period will be required to obtain a DIN within 28 days of being appointed a director. After the transitional period, any person intending to become a director must obtain a DIN prior to being appointed as a director (or as directed by the Registrar).
Individuals requiring a DIN can apply through the electronic platform provided by the Registrar and should sign in using their myGov ID app or in a form approved by the Registrar.
An application must not be made by another person on behalf of the individual, unless the Registrar is satisfied the individual is unable to make the application on their own behalf. For example, if a director suffers some incapacity, such as a disability, injury or is illiterate.
Your HLB Mann Judd adviser will be in contact with you to talk you through your specific requirements closer to the start of the transitional period.