The extensive responsibilities of being a director could soon increase with a government proposal to introduce a “Director Identification Number” (DIN), a unique identifier for every director of an Australian registered body. The proposal comes as part of an ongoing endeavour to stamp out phoenixing activities and to modernise business registers across Australia.

The main consultation phase has recently closed and the legislation is expected to be entered into parliament in 2019.

What is a Director Identification Number (DIN)?

The proposed DIN is a permanent and unique identifier (similar to a tax file number or Australian Business Number), which every director will need to obtain.

The DIN will permanently be associated with a particular individual even if the directorship with a particular company ceases.

Who will need a DIN?

Every person who consents to being a director of registered body (ie. a company, registered foreign company, registered Australian body, or an Aboriginal and Torres Strait Islander corporation) under the Corporations Act (or the CATSI Act) will be required to have a DIN.

The proposal initially applies only to appointed directors and acting alternate directors, it does not extend to de facto or shadow directors. However, the definition of “eligible officer” may be extended by regulation to any other officers of a registered body as appropriate. This will provide the flexibility to ensure the DIN’s effectiveness going forward. Just as the definition of eligible officer may be extended, the registrar also has the power to exempt an individual from being an eligible officer to avoid unintended consequences.

Benefits of a DIN system

• Having one unique identifier will make it easier for Regulators to trace a director’s relationships across companies. This will in turn make investigating a director’s potential involvement in repeated unlawful activity easier.
• The DIN will improve data integrity and security as directors will undergo full identification procedures before being issued a DIN. Under the current system, only the directors’ details are required to be lodged with ASIC and no verification of identity is carried out.
• Significant improvements in efficiency are expected as director details will be held in one central database and accessible by relevant regulatory authorities. One would expect that, in time, a director would only need to update their details (say for change of address) once, with the information flowing through to all other relevant databases (such as ASIC and the Australian Business Register).

Registration process

At this stage, it is proposed that:

• Directors must apply to the registrar for a DIN within 28 days from the date they are appointed.
• Existing directors will have 15 months to apply for DINs from the date the new requirement starts.

Treasury is currently consulting with the public with regards to possible registration fees.

Penalties for failure to register

Directors that fail to apply for a DIN within the applicable timeframe will be liable for civil and criminal penalties.

In addition to the penalties for failing to apply for a DIN, there are also civil and criminal penalties which apply to conduct that undermines the requirement. For example, criminal penalties apply for deliberately providing false identity information to the registrar, intentionally providing a false DIN to a government body or relevant body corporate, or internationally applying for multiple DINs.

Recently, there have been cases in the media where individuals have unknowingly or unwittingly become directors of sham companies for various reasons. The DIN proposal inserts a defence for directors appointed without their knowledge, due to either identify theft or forgery. However, it notes that the defendant will carry the evidential burden to adduce or point to evidence that suggests a reasonable possibility that the defence exists, and once that’s done the prosecution bears the burden of proof. The government notes that the evidential burden has been reversed because it is significantly more costly for the prosecution to disprove than for the defence to establish.