New amendments to the Corporations Act 2001 and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will require current and prospective directors of Australian companies to apply for a unique identifying number known as a director identification number (or DIN for short).
The DIN scheme
The key details of the DIN scheme are as follows:
- current and prospective directors must apply to obtain a unique number which will be used to identify them as an individual during their lifetime;
- a director will be issued a DIN upon providing sufficient proof of identify to the Australian Securities and Investments Commission (“ASIC”)
- the purpose of the scheme is to deter “phoenixing” activities by company directors (which is where a company director avoids discharging the liabilities of the company by shutting the company down and transferring all of its assets to another company controlled by the same director)
- the DIN will be used by regulators and external administrators to trace a director’s relationship across companies. The Commonwealth Government expects that this will enable better tracking of directors of failed companies and prevent directors from using fake names when setting up new companies
- the scheme will commence on 22 June 2022 (unless an earlier date is set). Current and prospective directors will not have to take any steps until the DIN scheme commences
- civil and criminal penalties will apply to directors who fail to apply for a DIN within the timeframes set out in the legislation
The law currently requires the details of the directors of a company to be lodged with ASIC when the company is first set up. However, at present, ASIC is not required to verify the identity of directors. The introduction of the DIN could see directors being required to provide 100 points of identification or a personal tax file number before they can be appointed.
Charity reporting
If a company is registered as a charity with the Australian Charities and Not-for-profit Commission (“ACNC”), the charity must notify the ACNC of changes to its responsible persons, but is not required to notify ASIC any changes to the directors of the company.
One likely consequence of the DIN scheme is that companies registered as charities will update changes to the company’s directors with ASIC as well as the ACNC to ensure that each director’s history can be accurately traced through the DIN. This will further undermine efforts to reduce the regulatory and reporting burden on charities.
For more information about the DIN scheme, please contact Joanne O’Brien
First Published By Joanne O’Brien – CRH LAW
