Permanent Directors Identification Numbers have arrived
3 mins reading time
In the past year, the Australian Federal Government has rolled out legislation to combat illegal phoenix activities by company controllers which included the requirement for company directors to obtain a Director Identification Number (DIN).
After a failed attempt to introduce a DIN for all company directors in 2018, the Bill has finally passed and awaits Royal Assent.
The Bill will amend the Corporations Act 2001 (Cth) (the Act), to require all company directors, including foreign and alternate directors, to hold a unique DIN issued and administered by ASIC.
Once issued the DIN will permanently remain with that director, across all current and future directorships.
DIN application
An ‘eligible officer’ (a director, alternate director or any other officer of a registered body of a kind prescribed by regulations) must apply to ASIC for a DIN. Prospective directors may apply for a DIN up to 12 months prior to appointment (or if directed by the ASIC Registrar).
Eligible officers will be required to submit prescribed personal information (to be determined by the Registrar) and undergo a 100 point identity verification with ASIC. Once verified, ASIC will issue a DIN to the director.
Whilst the Registrar has the power to request an applicant’s Tax File Number, they have no power to compel its provision.
who doesn’t need a DIN
Directors of unincorporated entities (i.e. unregistered joint ventures or partnerships) or persons acting as shadow or de facto directors will not be required to have a DIN at this stage.
Significantly, the legislation allows the Minister to introduce these requirements in future should it be considered necessary.
timeframe to apply
- Existing Company Directors – An application must be made within a timeframe to be specified by the Registrar. ASIC will notify directors of the requirements and time frame to make an application.
- New Company Directors – Any person intending to become a director must have made an application before they consent to act (or as directed by the Registrar). For the first 12 months, the transitional provision will permit a new company director to apply for a DIN within 28 days of their appointment to the Board.
prohibitions & penalties
The Act provides for both civil and criminal penalties (including imprisonment) for contravention of the DIN requirement. Additionally, a director must not:
- Apply for additional DINs; or
- Misrepresent a DIN to a Government or registered body (or provide false or misleading information to the Registrar to obtain a DIN).
Only the Registrar will have the power to cancel and reissue a DIN, a director will hold its DIN forever, even if they cease to be a director and will not be entitled to change or cancel it unless done so by the Registrar.
how will this affect your company?
The main purpose of introducing the DIN is to prevent illegal phoenix activity and prevent directors from registering under different names to escape liability. Benefits of the DIN requirement are:
- Traceability of Director Interests – Companies will be able to clearly identify all board positions held by a director to identify involvement in failed companies, associated interests or any perceived or actual conflicts of interest.
- Prevention of Phoenix Activity – Directors will no longer be able to change personal information or disassociate themselves with a company. The register will record all interests in a company, including companies wound up in insolvency.
what next?
Initial administrative burden (and likely expenses) aside, the introduction of a DIN is a positive step in corporate governance. Companies must ensure its directors apply within the appropriate timeframes and that its corporate records are updated accordingly. This may present companies an opportunity to review its directors’ interests to ensure that they are not engaged in any illegal phoenix activity, have made any misrepresentations to the Board, or hold positions which may be an actual or perceived conflict of interests.
If you require advice or further assistance navigating the changes to the Act, please do not hesitate to contact Olivia Christensen of the Macpherson Kelley Corporate team.
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Permanent Directors Identification Numbers have arrived
In the past year, the Australian Federal Government has rolled out legislation to combat illegal phoenix activities by company controllers which included the requirement for company directors to obtain a Director Identification Number (DIN).
After a failed attempt to introduce a DIN for all company directors in 2018, the Bill has finally passed and awaits Royal Assent.
The Bill will amend the Corporations Act 2001 (Cth) (the Act), to require all company directors, including foreign and alternate directors, to hold a unique DIN issued and administered by ASIC.
Once issued the DIN will permanently remain with that director, across all current and future directorships.
DIN application
An ‘eligible officer’ (a director, alternate director or any other officer of a registered body of a kind prescribed by regulations) must apply to ASIC for a DIN. Prospective directors may apply for a DIN up to 12 months prior to appointment (or if directed by the ASIC Registrar).
Eligible officers will be required to submit prescribed personal information (to be determined by the Registrar) and undergo a 100 point identity verification with ASIC. Once verified, ASIC will issue a DIN to the director.
Whilst the Registrar has the power to request an applicant’s Tax File Number, they have no power to compel its provision.
who doesn’t need a DIN
Directors of unincorporated entities (i.e. unregistered joint ventures or partnerships) or persons acting as shadow or de facto directors will not be required to have a DIN at this stage.
Significantly, the legislation allows the Minister to introduce these requirements in future should it be considered necessary.
timeframe to apply
- Existing Company Directors – An application must be made within a timeframe to be specified by the Registrar. ASIC will notify directors of the requirements and time frame to make an application.
- New Company Directors – Any person intending to become a director must have made an application before they consent to act (or as directed by the Registrar). For the first 12 months, the transitional provision will permit a new company director to apply for a DIN within 28 days of their appointment to the Board.
prohibitions & penalties
The Act provides for both civil and criminal penalties (including imprisonment) for contravention of the DIN requirement. Additionally, a director must not:
- Apply for additional DINs; or
- Misrepresent a DIN to a Government or registered body (or provide false or misleading information to the Registrar to obtain a DIN).
Only the Registrar will have the power to cancel and reissue a DIN, a director will hold its DIN forever, even if they cease to be a director and will not be entitled to change or cancel it unless done so by the Registrar.
how will this affect your company?
The main purpose of introducing the DIN is to prevent illegal phoenix activity and prevent directors from registering under different names to escape liability. Benefits of the DIN requirement are:
- Traceability of Director Interests – Companies will be able to clearly identify all board positions held by a director to identify involvement in failed companies, associated interests or any perceived or actual conflicts of interest.
- Prevention of Phoenix Activity – Directors will no longer be able to change personal information or disassociate themselves with a company. The register will record all interests in a company, including companies wound up in insolvency.
what next?
Initial administrative burden (and likely expenses) aside, the introduction of a DIN is a positive step in corporate governance. Companies must ensure its directors apply within the appropriate timeframes and that its corporate records are updated accordingly. This may present companies an opportunity to review its directors’ interests to ensure that they are not engaged in any illegal phoenix activity, have made any misrepresentations to the Board, or hold positions which may be an actual or perceived conflict of interests.
If you require advice or further assistance navigating the changes to the Act, please do not hesitate to contact Olivia Christensen of the Macpherson Kelley Corporate team.