Recently enacted amendments to the Corporations Act have created a new “super registrar” and will require all current directors and persons who are to be appointed directors to obtain a Director Identification Number (DIN) and to comply with new DIN requirements.
What are the changes?
Under the new legislation, all registry functions will be transferred to a single Commonwealth Business Registrar (Registrar) to be administered by the Australian Tax Office (ATO). Thirty-one business registers maintained by the Australian Securities and Investments Commission (ASIC) (including the Companies Register) and the Australian Business Register will be combined onto one information technology platform to be administered by the Registrar.
The DIN requirements will apply to current directors and persons to be appointed as directors of Australian registered companies, registered foreign companies and registered Australian bodies (such as incorporated associations that register with ASIC to operate outside the State or Territory in which they are registered). Persons who intend to become directors within 12 months may also apply for a DIN.
Once their identity has been verified by the Registrar, the director or appointee will be issued with a unique, permanent DIN, which the director or appointee will retain for life, even if they subsequently cease to be a director.
Why has the government introduced these changes?
As noted in the Explanatory Statement to the legislation introducing the changes, the DIN regime is designed to provide traceability of a director’s relationships across companies, enable better tracing of directors of failed companies and assist regulators and external administrators to investigate a director’s involvement in repeated illegal activity including phoenixing.
In his speech to Parliament regarding the bill introducing the DIN changes, Assistant Treasurer Michael Sukkar noted that Director IDs will:
“provide greater insights to regulators, businesses and individuals on the identity and affiliations of directors and prevent the use of fictitious identities.”
When will I need to apply for a DIN?
The legislation provides that the DIN regime will commence either on the date set by proclamation or if no proclamation is made, the changes will come into effect on 22 June 2022. The new regime was slated to commence in the first half of 2021, however, given the challenges arising from COVID-19, we expect it may not now commence until 2022.
Existing directors will have an 18 month period from the time the new legislation comes into effect to apply for a DIN. During the first 12 months of operation of the DIN regime, a person who is appointed as a director will be able to apply for a DIN within 28 days of the date of their appointment. After this transitional period, a person will be required to apply for a DIN before being appointed as a director.
What happens if I don’t comply?
Failure to apply for a DIN within the applicable timeframe is a strict liability offence and attracts civil and criminal penalties of up to 60 penalty units, which, as at the date of this article, equates to $12,600 or 12 months imprisonment (or both). Civil and criminal penalties of up to 100 penalty units ($21,000) or imprisonment for 12 months (or both) will also be imposed for deliberately providing false identity information to the Registrar, intentionally providing a false DIN to a government body or relevant body corporate and intentionally applying for multiple DINs.
How will the DIN regime impact my company?
Companies should seek legal advice in relation to the practical implications of the DIN regime for their corporate governance arrangements. For example, companies could face potential challenges appointing a director or alternate director on an urgent basis if that person does not already have a DIN. Also, companies will need to incorporate the DIN requirements in their processes for appointment and more critically, election of directors, so as to ensure that its members do not elect a person who does not have a DIN as a Director. Additionally, under the current system, directors may have multiple ASIC records as a result of providing different variations of their name (maiden or married name) or address. Under the DIN regime, directors will need to ensure they provide their correct personal details and update these details regularly to comply with the DIN requirements.
If you would like advice regarding how your business can prepare for the introduction of the DIN requirements, please contact Sarah Johnson.