The Government has reintroduced legislation to create a new system to register company directors using a unique identification number and to modernise Australia’s broader business registers.
The introduction of Director Identification Numbers (DIN) primarily targets phoenix activities, where company controllers shutdown an existing entity and transfer its assets to a new company as a means to avoid debts and liabilities, at significant cost to its creditors, employees and the Australian economy.
The new system was originally proposed in 2018 (which we wrote about here) as the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018 (Cth) (Bill), however the Bill lapsed in April 2019 with the dissolution of Parliament for federal election. This Bill forms part of the package of reforms now resurrected by the Government.
The DIN provisions contained in the current Bill are largely a reproduction of those contained in its 2018 predecessor. A key change relates to the timing requirements for DIN applications – under the 2018 iteration, directors would have had 28 days from their appointment as director to apply for a DIN, whereas under the current Bill, directors would need to apply for a DIN prior to their appointment. Also included in the Bill is a provision whereby, if a director fails to notify the Australian Securities and Investments Commission (ASIC) of their resignation within 28 days, the resignation will then only take effect from the date of notification, a change which could have ramifications for director liability. The legislation also proposes to prevent a director from resigning where to do so would leave the company director-less.
A contravention of the DIN requirements would have significant implications and will attract both criminal and civil penalties. The legislation remains before Parliament.
Authors: Georgia Milne & Clare Giugni
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Published by Georgia Milne, Clare Giugni