17 Jul Director Identification Number (‘DIN’) – What does it mean for your Company?
The roles and responsibilities of directors of companies are heavily regulated and the conduct of directors is often subject to scrutiny. In cases of poor corporate governance, discrepancies on ASIC records and the failure to provide correct and accurate information of directors can often make it difficult to hold directors accountable for their actions.
New legislation introduced by the Federal Government seeks to impose further regulations on directors and increase accountability for directors of companies. Currently, there is no requirement for ASIC to verify the identify of company directors leading to false information on the ASIC register and a lack of accountability for directors who are unable to be identified. In most cases, this arises from slight variations in names or addresses which make it difficult to reconcile all positions held by a single person in multiple entities. However in some cases, false information provided to ASIC can be used to escape liability for behaviour such as illegal phoenix activity (i.e. directors deliberately rendering a company insolvent and transferring assets to a new company to avoid paying its liabilities) or breach of directors duties and civil penalties under the Corporations Act 2001.
Overview of the new legislative scheme.
The Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020, introduces the requirement for directors of companies to obtain a director identification number (‘DIN’) from the Commonwealth Registry (a government body to be appointed under the Commonwealth Register Act 2020). This DIN would become a single identifier for each individual director across all of their officeholdings, ensuring the true identity of directors has verified and is consistent across all company records.
The intention of the DIN is make it easier for external parties (such as insolvency practitioners and regulators such as ASIC) to clearly identify directors and their appointments as officeholders of a company. If a director was engaging in illegal phoenix activity or had otherwise been involved in contraventions of the Corporations Act 2001 which would exclude them from acting as an officeholder of a company, this would be easily identified as each director can only hold a single DIN which has been verified against their true identity.
Obligations under the DIN regime
A director of a company must apply for a DIN prior to their appointment as a director of the company. An existing director must make an application within 28 days of a direction from the Commonwealth Registry that they are required to do so (i.e. upon the commencement of the scheme).
In applying for a DIN, company directors will be required to verify their identity and must not provide false information or knowingly obtain multiple DINs.
When does the DIN regime commence?
The DIN provisions under the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 are set to automatically commence on 22 June 2022 however it is subject to an earlier introduction date at the discretion of the Governor General.
It is expected that the regime may commence as early as 2021 and so it important that company directors carefully observe the directions in respect to their compliance with the new regime and be aware of their obligations to obtain a DIN within 28 days of the commencement of the scheme.