If you’re involved in the Australian business world, you probably have already heard about the Director Identification Number scheme that is slowly coming into fruition. But what exactly is this scheme, and how does it affect directors of businesses? We’ll break down what the DIN scheme is, how it affects you, and recent developments in the bill.

Understanding the Director Identification Number Scheme

In 2017, the Australian Federal government announced that it would be cracking down on illegal activities related to phoenixing. Phoenixing includes acts in which directors of companies will intentionally not pay liabilities by shutting their in-debt businesses down and transferring the assets to a different business.

According to the announcement, phoenixing activities have cost the Australian economy nearly $3.2 billion annually each year. The proposed solution to this problem was the introduction of a DIN, or Director Identification Number. At the time, the law only required that directors, including those in non-profit organisations, provide their identity information to the Australian Securities and Investment Commission (‘ASIC’).

The Treasury Laws Amendments (Registries Modernisation and Other Measures) Bill 2019 will amend the Corporations Act 2001 and the Corporation (Aboriginal and Torres Strait Islander) Act 2006. By implementing the DIN scheme, directors can be tracked along with their business history. Every individual who must get a DIN will have it for life, even if they stop working as a director.

Another purpose of the DIN scheme is to prevent fake or non-existent company directors from being appointed to roles for fraudulent reasons. Further, the DIN scheme will be able to track directors, their profiles, and their relationships to different companies over time to reduce instances of illegal phoenix activity and other fraudulent actions.

Obligations under the DIN Scheme

Once the law is fully implemented in June 2022, there will be four main obligations that directors will need to adhere to:

  1. Individuals who serve as a corporate director, alternate director, or any other entity of a corporate body registered through the Corporations Act (or CATSI) must apply for a DIN before they are appointed as a director.
  2. A corporate director must apply for a DIN by November 30th, 2022 or November 30th, 2023 for Indigenous corporations.
  3. Individuals are not permitted to apply for more than one single DIN.
  4. Individuals must not misrepresent or lie about their DIN to the Australian government or any other registered body.

After the scheme launches in late 2022, directors will be required to apply for a DIN within twenty-eight days from the date the individual is given the title of director at their company.

The DIN scheme will also apply to charities and non-profits as well as companies and enterprises. Due to this, directors for non-profit organisations that are registered with the Corporations Act, ACNC, and CATSI will need to apply for a DIN.

DIN Requirements

To apply for a DIN, you’ll need to provide the Commonwealth Registrar with a few key pieces of information:

  • Your current legal name and proof of identity with an Australian driving license, a passport, Medicare card, visa, or birth certification.
  • Any and all former names.
  • The date and location of your birth.
  • Your current and all former addresses.
  • Your current contact information, such as address and phone number.
  • Your Australian tax file number or TFN. This is not necessarily required, but the Commonwealth Registrar may request your TFN and has the legal authority to verify any information given from your ATO records.

Each director will receive one DIN, regardless of how many businesses they run, and that will be the only DIN they will have for the entirety of their careers.

Do I Have Anything to Worry About?

As it stands, not yet. While the official commencement for this scheme was announced, the system is still in its early stages. According to materials distributed by the Australian Treasury:

To ensure that the director ID system will provide a robust, reliable, and consistent user experience, it must be tested before the full population of directors are onboarded into the system. So that directors are not disadvantaged or in breach of the law, legislative instruments have been drafted that remove the need for directors to apply for a director ID in these early stages. The legislative instruments provide directors appointed under the Corporations Act 2001 (the Corporations Act) the period between the end of testing and 30 November 2022 to obtain a director ID. This timeframe will apply for both existing directors who were appointed prior to the commencement of the Director ID regime and directors appointed during the testing phase.”

Blaine Hattie is a commercial lawyer at Sutton Laurence King Lawyers.

Want a good commercial lawyer in your corner? Call Sutton Laurence King on 03 9070 9810 or email info@slklawyers.com.au

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