Who are you dealing with?

The authorities have long had difficulty keeping track of the identity of directors of Australian companies. The inability to know for certain the identity of a director has proved to be difficult when dealing with issues, including illegal phoenixing. The Government’s response has been to introduce a compulsory identification number. What does this mean for small-business owners?

1. What is it?

The Federal Government introduced the concept of a Director Identification Number (DIN). This is designed to be a unique number for anyone who is the director of a company in Australia.

The DIN will be registered in a new database, which will be maintained by the Australian Business Registry Service (ABRS), who will be managed by the ATO. The register will be made available to the public.

2. Why was it introduced?

The DIN was introduced as part of the Government’s attempt to improve the transparency and integrity by creating a central Commonwealth Business Registry.

The main driver for introducing the DIN was to deal with illegal phoenixing. It is meant to do this by increasing the accountability and traceability of directors. Please use this link to read more about illegal phoenixing and the Government’s new measures to deal with this.

Up until now, a director has been required to enter their details on the ASIC companies register for each company. It has been common for directors of a company that has gone into insolvency to turn up in a remarkably similar business, but with slightly different details as to their name or date of birth. This has made it very difficult to deal with directors who may have done the wrong thing.

3. What are directors required to do?

Existing directors will be required to apply for a DIN by 30 November 2022. If existing directors do not register for a DIN by that time, or new directors do not apply within the prescribed time, they will be subject to a fine and other penalties.

In addition to that, penalties will apply to directors in the following circumstances:

· Where a director intentionally applies for multiple DIN.

· Where a director provides a false DIN when registering as a director of a company on the ASIC companies register.

Any person (even if they are not a director) will be liable for a penalty if they are involved in any offence referred to above. This is likely to apply to any retained adviser.

4. Who is required to apply for a DIN?

Any person who is either appointed as a director, or who is acting as a director, is required to register for a DIN. This applies to companies registered in Australia and foreign-registered companies operating in Australia and include companies that are responsible for charities and managed investment schemes.

It is likely that directors registering for a DPN will be required to provide the following information:

· full name, including any former names

· addresses and former addresses

· contact details

· date of birth and place of birth

There is also a suggestion that a tax file number will be requested. However, it is not certain whether this will be compulsory.

The ABRS will be entitled to seek further information, if they deem that the above information is not sufficient to establish or confirm a director’s identity.

A director will be required to make their own application and will only be entitled to have a third-party (including accountants or advisers) do it on their behalf in circumstances that the ABRS is satisfied they could not make the application themselves.

5. How will the system operate?

The DIN register will be administered by the ABRS. The ABRS will have power to provide, record, cancel and re-issue a director’s DIN.

Once provided with a DIN, a director will keep that number for their lifetime, regardless of whether they cease to be a director. However, a DIN will be automatically cancelled if an individual does not become the director of a company within 12 months of it being issued.

Once the system comes into place on 30 November 2022, for a period of 12 months, new directors will have 28 days to register for a DIN. After that time (30 November 2023), a person will need to register for a DIN before they become a director of a company.

It is likely that it will be the responsibility of directors to keep their details current on the register. This would apply to a new address.

Beware of your obligations and register your DIN on time to avoid any penalties.