Director Identification Numbers
26 June, 2020Business salesBusiness Structures and GovernanceCommercial LawCommercial Law & Business TransactionsNews & Updates
The Australian Parliament passed the Commonwealth Registers Bill 2019 and the Treasury Amendment (Registries Modernisation and Other Measures) Bill 2019 on 22 June 2020 to consolidate national business registers and to introduce Director Identification Numbers (‘DIN’).
What are Director Identification Numbers?
The DIN will be a lifetime unique permanent number allocated to every new and existing company director. This number will be retained by the individual for life, even if they cease to be a director.
What’s the purpose of the DIN?
It is expected that the use of DIN will reduce fraud and the use of fictitious identities for the appointment of directors and assist regulators with tracing directors of failed companies. It will also make the investigation and prevention of unlawful behaviour, such as ‘phoenixing’, much easier.
‘Phoenixing’ is the term given to the actions of directors of a company who seek to deliberately avoid paying company liabilities by the winding up of the company and transferring its assets to another company, at significant cost to creditors, contractors and employees. The Australian Tax Office estimates the annual cost to the Australian economy as a result of phoenix activity is $2.85 billion to $5.13 billion. ¹
How do I obtain a DIN?
Once the new laws come into effect, all Australian company directors, including foreign directors and alternate directors, will be required to obtain and hold a DIN.
The application will require a verification of identity prior to being assigned a DIN.
The new regime will require new directors to hold a DIN prior to their appointment. For current directors there will be transitional period during which directors must apply for and obtain a DIN. We don’t yet know how long this transitional period will be.
When do I need to apply for a DIN?
We don’t have a date for when these new requirements will start, however there will be a 12-month transitional period at the commencement so that a person who is appointed as a new director will have 28 days to apply for a DIN. Current directors will also have the benefit of a transitional period, the period of which is yet unknown.
What happens if I don’t apply for a DIN?
There are criminal and civil penalties for directors who fail to apply for a DIN, as well as penalties for providing false information and for knowingly applying for a second DIN when one has already been assigned.
Please note that this article has been prepared by Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.
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¹ Click here to read the ATO’s publication ‘The Economic Impacts of potentially illegal Phoenix Activity’