Director Identification Numbers Are On Their Way
The Australian Government introduced in mid-2019 a renamed bill that requires directors and controllers of Australian companies to obtain Director Identification Numbers (often referred to as DINs) in order to confirm their identity to ASIC.
The renamed “The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019” aims to curb phoenix activity by using DINs to trace a director’s relationship across companies, particularly when they have failed and prevent the use of false identities. This Bill passed the House of Representatives on 27 November 2019 and was introduced into the Senate on that day. Ongoing progress of the Bill remains pending.
What is Phoenixing?
Phoenixing occurs when the controllers of a company deliberately avoid paying liabilities by shutting down a company that is in debt and transferring its assets to another company.
This impacts on creditors who fail to receive payments for goods and services, employees through lost wages and/or superannuation entitlements and the general public through lost revenue to the Government.
The Australian Government has stated that the total cost of phoenixing to the Australian economy is estimated to be between $2.9 billion and $5.1 billion annually.
What is a DIN?
A DIN will be a unique identifier for each person who consents to being a director. The person will keep that unique identifier permanently, even if they cease to be a director.
It is not intended that a person’s DIN will ever be re-issued to someone else or that one person will ever be issued with more than one DIN. It has been suggested that a potential director will be required to undertake a “100 point” check much like that which is done when opening a bank account.
Any person wishing to become a director must apply for a DIN before they are appointed.
To date, although the law has required that directors’ details be lodged with ASIC, it has not required a unique number to verify the identity of directors.
Don’t want a DIN?
It is anticipated that the legislation will contain both civil and criminal penalties for directors that fail to apply for a DIN within the applicable timeframe. There are also civil and criminal penalties to be imposed which apply to conduct that would otherwise undermine the new DIN requirement.
If you have further questions about DINs, please do not hesitate to contact us. We will provide further updates as this bill progresses.