Director Identification Numbers – what do they mean for you?
All directors of Australian companies will soon be required to verify their identity and obtain a Director Identification Number (DIN). Directors will keep their DIN forever. The administrative challenge of issuing DINs to such a broad class of people will be significant, and with strict penalties for non-compliance, directors should be aware of their obligations well before the regime commences.
Do I need to apply for a DIN?
All directors of registered Australian companies will be required to apply for a DIN, regardless of the size, structure or purpose of the company. However, at least initially, shadow directors (i.e. those who act as a director without being formally appointed to the role) will not be required to obtain a DIN.
How long do I have to apply?
The DIN regime is expected to commence within the next two years. During the first year of the regime, new directors will have 28 days to apply for a DIN after being appointed as a director. This timeframe will become even stricter after the first year, as new directors will be required to apply for a DIN before being appointed as a director. While existing directors will be afforded some flexibility during the transition period, directors should be prepared to apply for a DIN as soon as the regime commences, in order to avoid administrative delays and the potential for non-compliance.
Why is the regime necessary?
The ultimate goals of the DIN regime are to counter the effects of illegal phoenix activity and improve the efficiency of the insolvency process. Illegal phoenix activity involves the deliberate liquidation of a company to avoid paying its debts. The DIN regime aims to reduce this activity by helping trace directors and their relationships with companies, which will also benefit practitioners working in the insolvency field. The present piecemeal approach to director tracing has resulted in some directors having multiple unverified identity records with ASIC.
What should I be doing now?
Directors and companies should continue to keep abreast of their obligations, as strict penalties may be imposed for non-compliance with the regime. When further guidance is released, directors should begin compiling their identity documents to ensure they can promptly comply with their obligations. Our corporate governance team would be happy to assist with any queries in relation to your compliance with the DIN regime or your corporate responsibilities in general.
Brad Clark, Partner (07) 3307 4527 bclark@shandtaylor.com.au
Patrick Sherlock, Senior Associate
(07) 3307 4542