By Tim Downing, Partner 

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.