Changes are coming to directors and their registration requirements. Under the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (“the Bill”) eligible officers, including directors, will be required to have a Director Identification Number (“DIN”). Although the Bill was passed on 12 June 2020 and the new requirements are only expected to come into practice in mid-2021, it is important to be across these requirements before they are implemented.
Why the change?
As part of the government’s new business registry regime, amendments regarding the DIN will be made to the Corporations Act 2001 (Cth) (“Corporations Act”) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (“CATSI”). Under the current process a director’s details are lodged with ASIC but there is no verification of identity required. The new system will require directors to prove their identity. A Director will need to apply for a unique DIN with the aim being that a director will only ever have one DIN. This unique identifier will then remain with the individual even if they cease to act as a director and will not be reassigned.
The implementation of the DIN will increase the traceability of director’s dealings and relationships across companies and will help combat the use of fake identities. It is also envisaged that the DIN will decrease the administrative burden of tracking directors, improve data integrity and combat illegal phoenixing activity (for more information on phoenixing please click on this article.
Who do the changes apply to?
Under the new system ‘eligible officers’ will be required to have a DIN and comply with the new requirements. The use of the term ‘eligible officer’ captures more than just directors as described by their title. According to the changes to the Corporations Act and the CATSI, an eligible officer will be someone who is:
- Appointed to the position of a director;
- Appointed to the position of an alternate director and is acting in that capacity; or
- Any other officer of an Aboriginal and Torres Strait Islander corporation, Australian company or body corporate, or a registered foreign company that is prescribed by the regulations.
Individuals acting in the position of a director or alternate director will be captured by the legislation and will be required to have a DIN regardless of the name that is given to their position. This means that if an individual is made an alternate director but is still operating with their old title they will still be required to apply for and have a DIN.
About the changes
Under the new legislation it will be an offence if an eligible officer does not have a DIN. This is subject to some exception periods, for example it is acceptable for an individual to be operating without a DIN, provided they applied for one before they became an eligible officer and are awaiting its finalisation. An individual may apply for a DIN twelve (12) months prior to becoming an eligible officer.
Once a director or eligible officer has a DIN they must not intentionally misrepresent their DIN and it will be an offence for an individual to intentionally provide the incorrect DIN. This offence is one such example of the new system’s practical attempts to combat fraudulent activity and to increase the traceability of director activity. Similarly, it is an offence for an eligible officer to apply for another DIN. As stated in the government’s Explanatory Memorandum for the legislative changes regarding the DIN:
It is not intended that a person’s DIN will ever be re-issued to someone else or that one person will ever be issued with more than one DIN (except in limited circumstances such as when a record is corrupted). As such, the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identities.
The relevant Registrars will have the power to direct eligible officers to apply for a DIN and it is an offence if this directive is ignored. If a person does not have a DIN and does not apply for one once directed by the Registrar they may be served with an infringement notice under to the Regulatory Powers (Standard Provisions) Act 2014 (Cth).
Consequences for not abiding by the new requirements vary, with some offences, such as an individual applying for a second DIN when they already have one, possibly resulting in imprisonment.
How can Coulter Roache assist?
Staying on top of your duties as a director is crucial for your business and for your own personal liability. To ensure you are complying with your obligations it is best to consult your legal professional when considering decisions that may affect the company, or if you are taking on the role as a director, so that you are across your obligations.