Director Identification Numbers – more red tape?

The Exposure Draft of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018 (Exposure Draft) was released on 1 October 2018.   If enacted, the provisions contained in the Exposure Draft would amend the Corporations Act 2001 (Cth) and implement a regime including an identification number for directors and a single business register.  The Exposure Draft stems from the announcement made by the Federal Government in the 2018-2019 budget to “target organised crime and tax evasion” by implementing new measures.  Those measures include a new regime to “modernise the business registers program” and merge the Australian Business Register (ABR) with the Australian Securities and Investments Commission (ASIC) Register to make one platform administered by the ABR within the Australian Taxation Office (ATO).[1]  Within this new register, company directors will be required to have an identification number (Director Identification Number or DIN).

So just what is a Director Identification Number?

The Exposure Draft provides that a DIN is allocated to an Eligible Officer (defined below) who has applied to the ATO for this number and adequately confirmed their identity. A director is only allowed one (1) identification number.

Who needs to apply for a Director Identification Number?

An Eligible Officer is defined in section 1232 of the Exposure Draft as:

  • a director of a company, or body corporate, this is a registered Australian body or registered foreign company who:
    • is appointed to the position of director; or
    • is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to that position; or

  • any other officer of a company, or body corporate that is a registered Australian body or registered foreign company who is an officer of a kind prescribed by the regulations;

but does not include a person covered by the determination under subsection (2) or (3).

If enacted, Eligible Officers who have been directed by the Registrar to register will have 28 days from the date of being directed to apply for a DIN.[2]  Those who are appointed to be an Eligible Officer after the commencement of the regime will have twenty-eight (28) days from their appointment to apply.[3]  If a person is intending to become an Eligible Officer within the next twelve (12) months, they must also apply.[4]  Those who do not apply for this within the stipulated timeframe are subject to a pecuniary penalty of up to $200,000 for an individual or $1,000,000 for a body corporate.[5]

Why is a DIN necessary?

The Exposure Draft’s Director Identification Number regime is in response to the Government’s Pheonixing Taskforce which released a report that estimated illegal  activity in this area costs the Australian economy “between $2.85 billion and $5.13 billion annually”.[6] Illegal phoenix activity occurs when a new company is created to continue the business of an existing company by transferring its assets over to the new company and deliberately liquidating the old company to avoid paying its liabilities.[7] DIN’s are intended to promote transparency and accountability within the new registration platform to enable the ATO to confirm the identity of all directors and “map the relationships between individuals and entities over time”.[8]  The aim of creating a single register and implementing the DIN is for it to be easier for regulators to detect future breaches of the law such as illegal phoenix activity.  Furthermore, it is hoped that the regime will also save time for liquidators and administrators of companies by providing a stringent platform to track directors and their business history.

Have your say

The consultation on this draft legislation closes on 26 October 2018.  If you would like to make a submission, click here for the relevant information on how to do so.

Further references

Legislation

Corporations Act 2001 (Cth)

Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018

Related articles by Dundas Lawyers

Safe Harbour granted to proactive Directors of an insolvent company who are not merely ‘living in hope’

Directors’ Duties in Australia

Further information

If you require assistance in relation to applying for your Directors Identification Number (if and when the regime is enacted), please telephone me for an obligation free and confidential discussion.

 
Malcolm Burrows
B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013 | Mobile: 0419 726 535
e: mburrows@dundaslawyers.com.au

Disclaimer
This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

Footnotes on DIN Numbers

[1] Australian Government,  ‘Modernising Business Registers and Director Identification Numbers legislation’ (October, 2018)   <https://treasury.gov.au/consultation/c2018-t330649/>.

[2] Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018 s 1234 (1)(a).

[3] Ibid, s 1233(2)(a)(i).

[4] Ibid, s 1231(3)(a).

[5] Ibis, ss 1233(5), 1234 (3); Corporations Act 2001 (Cth) s 1317G (1B)(a)(b).

[6] Kelly O’Dwyer, ‘Legislation to combat illegal phoenix activity released for consultation’ (August 2018) Australian Government <http://kmo.ministers.treasury.gov.au/media-release/097-2018/>.

[7] Australian Taxation Office, ‘Illegal phoenix activity’ (July 2018) <https://www.ato.gov.au/General/The-fight-against-tax-crime/Our- focus/Illegal-phoenix-activity/>.

[8] Australian Government, ‘Modernising Business Registers and Director Identification Numbers – Frequently Asked Questions’ (October 2018) <https://static.treasury.gov.au/uploads/sites/1/2018/09/180927_MBR_FAQS.pdf>.

 

 

 

 

 

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