Introduction

From 1 November 2021, Directors of various entities registered under the Australian Corporations Act 2001 (Cth) will need to obtain a unique Director ID number. The Director ID’s purpose is to verify the identity of each director.

The new requirements have important implications for Australian subsidiaries of multinational companies, foreign corporations registered in Australia and for special purpose vehicles that may be established in Australia, such as joint venture companies and acquisition and financing vehicles.

Who is covered by the Director ID requirements?

Directors of the following types of entities are covered by the new requirements:

  • Companies incorporated under the Corporations Act
  • Australian bodies registered under Division 1 of Part 5B.2 in Chapter 5B of the Act (having an ARBN)
  • Foreign corporations registered under Division 2 of Part 5B.2 in Chapter 5B of the Act.

Aboriginal or Torres Strait Islander corporations (registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) are also covered.

The provisions also cover alternate directors when acting as such.

The provisions only cover directors who are actually appointed, and do not cover de facto directors or shadow directors, but the provisions could potentially be expanded to cover them.

Directors of Australian charities registered under the ACNC regime that are not within the above categories are not required to obtain a Director ID.

When is a Director ID required?

For directors appointed before the regime commenced on 1 November 2021 there is a transitional period up to 30 November 2022 to obtain a Director ID.

For directors appointed between 1 November 2021 and 4 April 2022, the Director ID must be obtained within 28 days of appointment.

For directors appointed on or after 5 April 2022, a Director ID must be obtained before appointment.

However, for directors who do not have Australian identity documents or an Australian tax file number, we would generally recommend they obtain a Director ID before appointment, given the 28 day deadline and the substantial penalties (over $1m) for non-compliance.

We do note that there is a power for the Registrar of the ABRS to extend the 28 day application period, including by way of a class instrument.

Importantly for foreign corporations registered under the Corporations Act, if a new foreign director is appointed after 1 November 2021, a Director ID need to be obtained within 28 days.

What is the application process?

Australian directors

For directors with an Australian “MyGovID” (which requires Australian identity documents) or with an Australian tax file number, there are online or telephone application processes.

Foreign directors

For foreign directors, however, the application process is paper-based and hard copies of identity documents (such as passports, birth certificates, photo ID cards or driver’s licences) will need to be certified by staff at an Australian Embassy, High Commission or Consulate or by a Notary Public.

Further details pertaining to the paper-based process for foreign applicants are set out in the Annexure, extracted from the ABRS website.

Given the paper-based nature of the process for foreign directors, and the need for paper copy documents to be certified, we would recommend that the steps required for foreign applications are commenced at the earliest possible date.

As noted above, we would also recommend that foreign directors are not appointed until a Director ID has been obtained, and any appointment is made expressly subject to obtaining a Director ID.

What are the penalties?

Criminal and civil penalties can be imposed for breach of the provisions, including failure to obtain a Director ID within the time required. Substantial civil penalties of up to A$1,050,000 (5000 penalty units) can be imposed.