Director Identification Numbers

Company directors required to sign up for director identification numbers under new anti-phoenixing scheme

Director Identification Numbers

Australian company directors must sign up to a new director identification scheme designed to tackle illegal phoenixing activity under new laws unveiled by the Federal Government in October 2018.

The long-awaited director identification numbers (DIN) draft legislation has been released by Treasury, alongside measures to simplify business registration processes.

We wrote a paper and recommended that DIN’s be introduced to curb illegal phoenixing activity.  The Federal Government seems to be now listening.

The identification measures have been designed to help the regulator detect, deter and disrupt phoenixing activity by tracking directors beyond individual businesses through a database of unique numbers.

The database will be administered through a new registry regime also being introduced, which will merge ASIC’s companies register with the Australian Business Register, currently kept by the commissioner of taxation.

The reforms are not expected to encounter political opposition and have been in the works for some time as part of broader efforts to simplify national business registers and make it easier to track directors.

The government indicated plans to draft legislation under measures outlined in the 2018-19 budget, following a response to a Productivity Commission report into the matter last year.

Director Identification Numbers (DINs) — what the changes mean for you

Under the proposed law changes, new company directors registered under the Corporations Act (or the CATSI Act) must apply for an identification number within 28 days of becoming a director.

Existing directors will have 15 months to apply for the scheme from the date of the scheme starting.

There will be civil and criminal penalties for directors who fail to apply for identification numbers, while regulators may also issue infringement notices to those who fail to comply.

Only appointed directors and acting alternate directors will be subject to the new laws initially, meaning de facto or shadow directors will not be required to sign up.

In 2015, the Productivity Commission estimated illegal phoenixing activity — where a director transfers assets to a new business and then liquidates the old company, only to begin trading the new business — costs Australia between $1.8 billion and $3.2 billion each year.

Business registers to be simplified

In what Treasury has called a “modernisation” of federal business registers, there are plans to create a new business registry regime which will merge two existing company databases.

These are ASIC’s company’s register and the Australian Business Register (ABR), currently overseen by the commissioner of taxation.

For business, this will mean there will be one central register to provide information to, rather than several.

The aim is to simplify things for regulators and businesses by ensuring the new database is “flexible, technology neutral and governance neutral”.

Information relating to 35 existing registers would be subject to the new regime, including 34 registers currently kept by ASIC.

An existing regulator will be appointed to oversee the new register, although there’s no detail yet on which body that will be.

Acknowledgements: SmartCompany.