On 1 October 2018, draft legislation was released with the objective of introducing a director identification requirement.
The legislation seeks amendments to the Corporations Act 2006 and the Corporation (Aboriginal and Torres Strait Islander) Act 2006.
The introduction of a Directors Identification Number (“DIN”) will require all Directors to confirm their identity and the DIN will be a unique identifier for each person who consents to be a Director. The DIN will remain with a person and will provide traceability of a Director’s relationships across companies, and thus enabling better tracking of directors of failed companies and will prevent the use of fictitious identities.
The objective of the new requirement for a DIN is to promote good corporate conduct.
The DIN is one of several initiatives that Commonwealth government has underway to deter and penalise phoenix activity. Phoenixing occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company. These activities impact on creditors who fail to receive payments for goods and services, employees through lost wages and / or superannuation and the loss of taxation revenue to the government.
It is estimated that the total cost of phoenixing to the Australian economy is between $2.9 – $5.1 billion annually.
Upon registration of a company, a Director will have 28 days to apply for a DIN. For persons who are currently Directors there are transitional provisions in place. A current Director will have 15 months to apply for a DIN.
The legislation provides for civil and criminal penalties in deliberately providing false identity information to the Registrar, providing a false DIN to government bodies or applying for multiple DIN’s. Maximum penalties include fines of up to $200,000 for an individual and $1,000,000 for corporations.
If you wish to read the Treasury Department’s Explanatory Notes on the proposed introduction of DIN’s or make a submission on this draft legislation they can be made with the Australian Government Treasury Department.