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The government has reintroduced a bill that will see the implementation of director identification numbers.
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Director identification numbers back on the table
10 December 2019
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Last week, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 was introduced, after the previous iteration of the bill lapsed with the calling of the May federal election.
In a bid to prevent illegal phoenixing activity, the new director identification numbers (DIN) will require all directors to confirm their identity to a unique identifier that will be kept permanently, even if they cease to be a director.
The unique identifier 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.
To date, current application to become a company director requires only a name, an address and a date of birth, with no requirement for a person to prove their identity.
The proposed DIN regime will aim to combat phoenix activity, as well reduce time and cost for administrators and liquidators during the insolvency process by providing a more streamlined tracking of directors and their corporate history.
Under the new requirements, new directors will have to apply for a DIN before they are appointed as a director unless the period is extended by the regulations or unless they are provided an exemption or extension by the registrar.
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A transitional period for existing directors will be specified by a legislative instrument made by the minister.
Those appointed as a director within the first 12 months of the new regime’s operation will also be granted an additional 28 days to apply for a DIN.
There will be civil and criminal penalties for directors that fail to apply for a DIN within the applicable time frame, and for conduct that undermines the new requirements, including providing false identity information to the registrar, or intentionally applying for multiple DINS.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell welcomed the new legislation as a way to combat illegal phoenixing.
“Illegal phoenixing not only hurts small business, it costs the economy as much as $3 billion per year,” Ms Carnell said.
“The DIN will allow regulators to detect and track rogue company directors to ensure they cannot engage in multiple instances of phoenixing.
“The legislation is a definite step in the right direction so that small businesses get a fair go.”
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