Next year there will be new regime for company directors – it is aimed at ensuring that all Australian company directors are accurately identified and that when promoting and operating a company no false names and identities will be used.
This has long been a problem for accountants, particularly those engaged in insolvency. The problems have not just been in the use of fictitious identities to facilitate illegal phoenix activities but also generally in trying to ensure that there is integrity and reliability of the public record for matters like the details of current and former directors of all registered companies.
The Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2019 amended the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) to introduce a director identification number (“DIN”) requirement.
The Act’s explanatory memorandum provides some detail as to what can be expected from the new law. It states:
The DIN will require all directors to confirm their identity and it will be a unique identifier for each person who consents to being a director. The person will keep that unique identifier permanently, even if they cease to be a director. It is not intended that a person’s DIN will ever be re-issued to someone else or that one person will ever be issued with more than one DIN (except in limited circumstances such as when a record is corrupted). As such, the DIN 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. This will assist regulators and external administrators to investigate a director’s involvement in what may be repeated unlawful activity including illegal phoenix activity.
The Federal Government believes that this new lifetime DIN will provide a simpler, transparent and more effective way of tracking directors and their corporate history and will therefore reduce the time and cost for insolvency practitioners.
The new Act requires every existing director and future director to apply to the registrar for a DIN. The person must apply before they are appointed a director unless the period is extended by the regulations or unless they are provided an exemption or extension by the Registrar. After receiving an application, the Registrar must provide the director with a DIN if the Registrar is satisfied that the director’s identity has been established. Verification can be expected to include a request for the director’s tax file number.
There are criminal penalties for not applying, for deliberately providing false identity information to the registrar, for intentionally providing a false DIN to a Government body or relevant body corporate, or intentionally applying for multiple DINs.
For example, for not applying for a DIN prior to appointment or within such other period as allowed by the regulations or registrar the outcomes then, if considered ‘criminal’, would attract a maximum of 60 penalty units (currently $222 x 60 = $13,320). Further, the offence is considered one of strict liability so there would be no defences. There is also the possibility of a civil penalty. The new DIN does not, at least initially, extend to what are commonly referred to as de facto or shadow directors.