Australian Business Register to be modernised

In the 2018-19 Budget, the Government announced it will modernise the Australian Business Register and the Australian Securities and Investments Commission (ASIC) registers by creating a single platform to be administered through the Australian Taxation Office (ATO) by the Australian Business Registrar.

Director’s Identification Numbers to be introduced

As part of those changes, the government will introduce a director identification number (DIN) requirement.

Under the new law, directors must apply to the registrar for a DIN within 28 days, unless the registrar provides an exemption or extension. Once satisfied that the director’s identity is verified, the registrar will provide the director with a DIN. Transitional provisions will allow current directors 15 months to apply for a DIN from when the law applies.

Initially, the DIN requirements apply only to appointed directors and acting alternate directors and not to de facto or shadow directors.

Measures designed to curb illegal phoenix activity

One of the major reasons for introducing the DIN is to assist regulators and external administrators to investigate director involvement in possible repeated illegal acts including illegal phoenix activity, which costs the Australian economy between $2.9 billion and $5.1 billion annually.

“Phoenixing” occurs when company controllers deliberately avoid paying debts by shutting down a company and transferring its assets to another company. Creditors are not paid, employees miss out on lost wages and entitlements, and the government also loses tax and other revenue.

Tracking directors who previously engaged in phoenixing activity may allow the ATO to seek bonds from directors starting new businesses with a new ABN so future taxation obligations will be met.

Penalties for contraventions

There will be significant civil and criminal penalties for DIN contraventions and the registrar may also issue infringement notices for contraventions.

Failing to apply for a DIN or misrepresenting a DIN will be a ‘strict liability’ offence and will result in substantial financial penalties and a criminal conviction.

Civil penalties will apply to anyone who is found to have aided, abetted, counselled, procured, induced or been knowingly concerned or a party to the contravention, or has conspired with others to effect the contravention. The maximum civil penalty applicable under the Corporations Act is $200,000 for an individual or $1 million for a body corporate.

 

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Please note that this article has been prepared by Margaret Miller, partner of Bell Legal Group, for information purposes only. It is not legal advice nor should it be relied upon as such.