In order to combat illegal phoenixing activities by company directors and promote good corporate conduct, the Australian Government has introduced legislation requiring company directors, including foreign and alternative directors, to obtain and carry a Director Identification Number (DIN).

On 22 June 2020, the new laws came into effect. Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 details the amendments to the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 to introduce a DIN requirement. The Schedule sets out who the new requirements apply to, the associated obligations, how the new requirement is administered, and the consequences of non-conformity with the DIN requirements.

Illegal phoenixing activity and the purpose of the DIN

By way of background, illegal phoenixing occurs where a new company is created in order to continue the business of a company which has been deliberately liquidated in order to avoid paying its debts (including employee entitlements, creditors and taxes). The purpose of the DIN is to provide traceability of a director’s relationships across companies, therefore enabling better tracking of directors of failed companies, and preventing the use of fictitious identities and identity fraud. Consequently, this will assist regulators and external administrators to investigate a director’s involvement in what may be repeated unlawful activity, including illegal phoenix activity.

DIN requirements and obligations

All company directors will be required to confirm their identity before receiving a DIN. Although historically the law has required directors’ details to be lodged with ASIC, there has not been a requirement that ASIC verify the identity of directors. Beyond combating illegal phoenixing activity, the other benefits to be gained from these new laws include, improvements to the efficiency of the insolvency process, improved data integrity and security, and more thorough tracking of directors and their corporate history.

Importantly, the new laws create four new obligations:

  1. Directors must apply for DIN before being appointed;
  2. Directors must apply for a DIN within a prescribed period of 28 days from the date the direction is given, unless another direction is provided by the Registrar;
  3. A person cannot apply for a new DIN if they already have one. This prohibition does not apply where:
    1. a person has been re-directed to apply for a DIN by the Registrar; or
    2. where the person applies for the additional DIN under another Act.
  4. A person must not misrepresent a DIN to a body that is likely to rely upon the DIN for regulatory compliance or identification purposes.

Applying for a DIN

ASIC will administer, control and track the DINs and eligible officers must make their DIN application via ASIC. Prospective directors may also apply up to 12 months prior to appointment or if directed by the ASIC Registrar. Prescribed personal information as well as a 100-point identity verification process will also be undertaken prior to the issuing of a DIN.

Next steps

As all company directors (unless exempt under the Act) must apply for a DIN, it is vital the prescribed timeframes are complied with. It is also paramount that company records are update accordingly.

How can we help?

If you would like further information or have a legal matter relating to one of our Areas of Law and require our assistance, contact our office on (07) 3036 0649 or email tracey@robinsonnielsen.com.au.

This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this update to specific issues or transactions. For more information or specific advice on your circumstances please contact tracey@robinsonnielsen.com.au.