The passage of the Treasury Laws Amendment (registries Modernisation and Other Measures) Bill 2019 (the Treasury Bill) is the latest step by the Commonwealth Government to improve director accountability. On commencement, Schedule 2 of the Treasury Bill will amend the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (the Corporations Acts) to introduce the requirement for directors to hold a Director Information Number (DIN) which will remain with them across all future directorships.
Why are DINs being introduced?
According to the explanatory memorandum, the DIN requirement is intended to:
“Provide traceability of a directors relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identities. This will assist regulators and external administrators to investigate a director’s involvement in what may be repeated unlawful activity including illegal phoenix activity.”
Although this is fundamentally an accountability measure, it is also expected that the DIN system will reduce administrative time and costs associated with identifying directors and tracing their corporate history.
Obligations under the DIN regime
Directors of corporations registered under either of the Corporations Acts will be required to apply for a permanent DIN which is a unique identifier that will not be re-issued to any other person. Under the new system, the registrar (an existing Commonwealth body given administration powers under the Commonwealth Registers Act 2019, likely to be ASIC) must issue a director with a DIN if they are satisfied of the director’s identity.
The new DIN requirement will require:
- future officers to apply for a DIN prior to appointment (however in the first year of the new system, new officers will have 28 days within being appointed to apply for a DIN); and
- existing officers to apply for a DIN within a prescribed period after being directed to do so by the registrar.
The bill also prohibits directors from:
- deliberately providing false identity information to the registrar;
- knowingly providing a false DIN to a government body or relevant body corporate; and
- knowingly applying for multiple DINs.
There are criminal penalties attached to each of these acts, and the registrar will have the power to issue infringement notices.
As the Treasury Bill is currently awaiting Royal Assent, there is no confirmed date as to when the DIN requirements will commence. The Explanatory Memorandum notes that the DIN system will not come into place until the Minister appoints an administrative body to act as the registrar.
According to the AFR, the DIN is expected to come into force from the first half of 2021.
The introduction of a DIN is a positive step for ensuring director accountability in corporate governance. Companies must ensure that when the regime comes into force, their directors apply for a DIN within the appropriate time frames and that their compliance frameworks are updated.
Please contact our offices if you require any further guidance or assistance regarding the transition to the DIN system.
By Rob Feiner, Director, Ayesha Singh, Lawyer and Nik Sachdev, Graduate