Director Identification Numbers (“DINs”) – now a requirement for prospective directors to apply before appointment

Print Friendly, PDF & Email

By Tim Downing, Partner and Prue Tyson, Lawyer

As from 5 April 2022, a person who is not yet, but who is intending to become, a director of a body corporate under the Corporations Act 2001 (Cth) or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will need to apply for a DIN before their appointment as a director.

This requirement replaces the transitional “28-day” post-appointment deadline that applied to persons who were appointed as a director for the first time between 1 November 2021 and 4 April 2022.

Anyone who was a director on or before 31 October 2021 will still have until 30 November 2022 to apply for a DIN.

We encourage interested parties to visit our August 2020 update (see below and through this link: Director Identification Numbers) for a general overview of the DIN regime and consequences for non-compliance.

For a step-by-step guide to making a DIN application visit the Australian Business Registry Services website (accessible here).

Background

The Director Identification Number (DIN) regime is coming.

The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (Cth) (the Bill) was passed on 12 June 2020 and subsequently received Royal Assent on 22 June 2020. The Bill, together with other legislative changes, is part of the Federal Government’s ‘Modernising Business Registers Program’ that is aimed at unifying the Australian Business Register and more than 30 other business registers that are administered by the Australian Securities and Investments Commission.

The introduction of the DIN regime is a central component of the Bill’s objective and is given effect through amending the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth).

What to remember

  • Directors will be required to have their identity verified and have a unique and permanent identifier issued to them.
  • Companies (and their advisers) will need to put processes in place to ensure that all existing directors apply for a DIN within the prescribed timeframe once the DIN regime is implemented.
  • Once the DIN regime is implemented, companies (and their advisers) will also need to ensure that director appointment processes include the necessary steps for new directors to apply for a DIN. Once the transitional period ends, this process will need to be undertaken prior to a director appointment.

The DIN regime

The DIN regime is part of the Federal Government’s wider objective of:

  • tackling illegal phoenix activity;
  • making company directors more traceable and accountable;
  • streamlining business registers by providing a single-point of contact; and
  • furthering the Government’s ‘Deregulation Agenda’ by creating an electronic system than is readily accessible to everyone.

The DIN regime will involve a one-time application that requires directors of private and public companies (including foreign-born or foreign domiciled directors) and alternate directors to have their identity verified and then be allocated a DIN as a unique and permanent identifier. A DIN will continue to apply to the director even if he or she leaves their position. The DIN regime will not initially apply to de facto or shadow directors, or directors that have been exempted by the appointed registrar. It will also not apply initially to company secretaries, however, the legislation provides power to extend the DIN regime by regulation to other officers.

In addition, a person who is not yet a director, but who intends to become a director within 12 months, may also apply for a DIN. If such a person does not become a director within 12 months of a DIN being allocated, the DIN will be automatically cancelled.

DINs will be recorded in a new database that will be administered and operated by a registrar from an existing Commonwealth body. The identity of that Commonwealth body is yet to be announced.

The regime will make it easier for the registrar to verify director identities and refuse/cancel a DIN where an individual’s identity is in question. The requirements for identity verification remain to be confirmed, but will be contained in data standards made be the relevant registrar.

Additionally, the regime will also aid regulators and external administrators by establishing a transparent system that will in turn create a more timely and cost-effective process when investigating and commencing proceedings against directors.

When does a DIN need to be obtained?

The implementation date for the DIN regime has yet to be officially announced, with implementation to occur 2 years after the Bill received Royal Assent unless an earlier date is set. It is anticipated that the roll out will occur in the first half of 2021. However, commencement may well be later given the impacts of COVID-19.

Within the first 12 months following implementation, new directors will have 28 days after appointment as a director to apply for a DIN. Following this period, individuals must apply for a DIN before becoming a director. For existing directors, transitional provisions will provide a period during which they will need to obtain a DIN.

Whilst directors will be required to have a DIN, the obligation is to have applied for, rather than obtained, a DIN prior to appointment as a director. This is to provide flexibility, and a defence, for circumstances where a DIN has not been issued for reasons outside the control of the relevant person (e.g. processing delays).

Consequences for non-compliance

Under the proposed regime, there will be civil and criminal penalties for:

  • failing to apply for a DIN within the prescribed timeframes;
  • failing to apply for a DIN if directed by the registrar;
  • intentionally applying for more than one DIN;
  • intentionally providing a false DIN to a government body or relevant body corporate; and
  • being actively involved in the contravention of any the above offences.
For further information, please do not hesitate to contact us.

Get the latest news insights and articles straight to your inbox, simply enter your details.

    *
    *
    *
    *Required Fields

    M&A/Corporate Advisory

    Corporate Advisory Bulletin - June 2020