The Commonwealth Treasury has now released draft legislation to modernise and consolidate Australian business registers and to adopt a new system to create Director Identification Numbers (DIN) for company directors.
What are the key changes?
Announced as part of the 2018-19 Budget, the changes are two-fold – the registry changes are designed to consolidate over 35 business registers into a single streamlined, flexible and technology neutral platform, overseen by a single entity. Initially, the regime will apply to registers maintained by Australian Securities and Investments Commission (ASIC) and the Australian Business Register (which is under the purview of the ATO) but with a view to other government registers gradually being brought on board.
The introduction of Director Identification Numbers (DIN) is intended to target phoenix activities, where company controllers shutdown an existing entity and transfer its assets to a new company as a means to avoid debts and liabilities, leaving creditors out of pocket and estimated to cost the Australian economy over $3 billion each year.
Under the draft reforms:
- directors will be obliged to verify their identity with ASIC
- verified directors will be issued with a unique numerical identifier, that travels with them as they move between companies and directorships, providing greater transparency and traceability to regulators and allowing them to better identify repeat instances of unlawful activity
- directors will be required to apply for a DIN within 28 days of becoming a director (subject to a 15 month transitional period)
- the registrar will be empowered to grant, maintain, cancel and determine how DINs and infringement notices are issued.
Under the current system, directors’ details are registered with the ASIC, but they are not verified. Civil and criminal penalties will apply for non-compliance with the new regime.
The creation of a new database and improved data integrity offered by the reforms is also expected to have positive flow on effects for insolvency practitioners in their administration of the insolvency process.
Timeframe for comment
The draft legislation is being released in two parts – the current release addresses the introduction of a new registry system and the requirements for a DIN and is open for comment until 26 October 2018.
The second tranche, which will include details around implementation, will be released shortly.