On 12 June 2020, the Federal Government passed legislation which will require directors to register and be issued with a Director Identification Number (DIN).
The main justification for introducing the DIN regime is to prevent illegal phoenixing, which is estimated to cost Australia between $2.9 billion and $5.1 billion annually.*
Illegal phoenixing is where controllers of a company avoid paying liabilities by shutting down an insolvent company and transferring its assets to a new company. The DIN regime is also intended to prevent director identity fraud, among other benefits. This is because under the current regime, it’s easier for directors to have false names recorded with ASIC or to have multiple records with different names.
The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (Cth) has passed both houses of parliament, however, it is still awaiting assent. The DIN regime is expected to begin in early 2021 with a 12 month transition period. Existing directors will have a grace period to register, whereas new directors will need to register within 28 days of their appointment. After the 12 month transition period all directors will need to register prior to their appointment.
Foreign directors may have particular difficulties complying with the new regime and will need to pay close attention to future announcements.
There are potential civil and criminal penalties under the legislation which apply to the following acts:
Directors applying for multiple DINs or misrepresenting their DIN could be liable for up to 12 months imprisonment. Companies and directors will need to be diligent in their compliance with the new requirements.
Should you require any assistance regarding the DIN regime, our highly experienced Commercial Lawyers are available to assist you.
Please contact our office on (08) 9274 1977 to make an appointment to discuss your needs.
* Explanatory Memorandum 2016-2017-2018-2019, Treasury laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (Cth) 39