The Federal government is proposing the introduction of Director Identifier Numbers (“DINs”) to provide greater tracking of director history.
The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018 (“Bill”) looks to implement the DIN regime, as well as an overhaul of the current registries operated by ASIC and the Australian Business Registrar (“ABR”).
Director Identifier Numbers
The introduction of DINs was first announced in September 2017 in response to the Phoenix Taskforce, a taskforce comprising 32 federal and state government agencies aimed at combatting illegal phoenix activity. The Phoenix Taskforce estimates that in 2015-2016, illegal phoenix activity cost the Australian economy between $2.85 billion and $5.13 billion.
In a nutshell, phoenix activity is the process of avoiding creditors by transferring the assets of the debtor company to a new company carrying on a similar business. This process is analogous to the mythical phoenix arising from the ashes of its predecessor.
DINs will assist in preventing phoenix activities by providing ASIC with a better system for tracking the history of individual directors. ASIC will be able to track patterns of director behaviour using a DIN to detect suspicious activity, such as the continuous winding up and incorporation of companies.
The Bill will amend the Corporations Act and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (“CATSI Act”) to require a person appointed as a director of a body corporate to have a DIN. A person who has been appointed as a director will have 28 days to apply for a DIN from the date they are appointed. It is proposed that existing directors will have 15 months to apply for a DIN.
The registrar will have the power to determine how DIN records are stored, maintained and integrated or linked to other data. It is unclear at this stage whether the public will be able to search the new register by DIN to obtain the history of a director.
The legislation will initially only apply to “eligible officers”, being directors and acting alternate directors. There is scope in the draft legislation for regulations to expand on the definition of “eligible officer” to include, for example, secretaries, administrators, receivers and liquidators.
The registrar will have the ability to exempt certain persons or classes of persons from needing a DIN. This power may be exercised if it becomes apparent that it is inappropriate for a person or group of persons to be required to obtain DINs.
It will be an offence for a person to knowingly apply for multiple DINs, or for a person to misrepresent a DIN to a government body or a registered body (such as a company or Australian registered body).
DINs will only be issued to directors, and persons that intend to become directors within 12 months. If someone applies for a DIN when they expect to become a director within 12 months, the DIN will be automatically cancelled if the person does not become a director within 12 months. The cancelled number may be reallocated to the same person if they later reapply for a DIN.
The proposed penalties are substantial. The table below provides the proposed penalties under the Corporations Act. Similar penalties apply under the CATSI Act.
Modernising Australian Registries
31 different business registries will come under a new system to be administered by the ABR. The system will include a new platform that is expected to be a vast improvement on the current platforms used by ASIC and the ABR.
The registries effected by the changes include the Australian Company Register, Business Names Register, Financial Adviser Register, Registered Company Auditor Register, Australian Financial Services Licensee Register, Authorised Representatives Register and Australian Credit Licensee Register.
The timeline for the implementation of the updated registries and the DIN regime is not confirmed, with a detailed plan expected to arise in the next few months. It is likely that the platform will be delivered iteratively over time to minimise the disruption in access to the registries.