Company directors should be aware of new laws coming into effect relating to the introduction of Director Identification Numbers (DIN). These new laws amend the Corporations Act 2001 (Cth) (Corporations Act) and impose obligations which, if not adhered to, may result in civil and criminal penalties.

Background

The introduction of DIN was first recommended in report by the Productivity Commission (the Australian Government’s independent research and advisory body) in 2015 as a means to:

(a) monitor director registrations and detect disqualified or fraudulent directors;

(b) collect data regarding director appointments over time (to establish patterns of director involvement in repeat business failures); and

(c) detect possible fraudulent and phoenix activity (being when directors of a company purposefully avoid paying liabilities by shutting down an existing indebted company and transferring its assets to a new company).[1]

In June 2020, the Federal Government passed the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth) (the Act) which introduced the requirement for every director to obtain a DIN. This change was part of broader changes passed with the intent to improve the integrity of Australian business registers and create a central Commonwealth Business Registry. The program will establish the new Australian Business Registry Services (ABRS) and hopes to streamline how business information is registered, viewed and maintained.

The Act commenced on 4 April 2021 and invokes a new Pt 9.1A of the Corporations Act which provides for DINs and offences for failure to obtain a DIN. On 15 April 2021, the Commissioner of Taxation released its data standard “Corporations Director Identification Number Data Standard 2021”. The data standard sets out the information which the Registrar will require in order to be able to provide a DIN to an individual who has applied under the Act.

What is a DIN?

A DIN is a 15-digit identification number unique to each director.

A director must only apply for a DIN once and will then keep this number forever, including if they stop being a director, change to another company, are a director of multiple companies or move interstate or overseas.

A DIN starts with 036 (the 3-digit country code for Australia under International Standard ISO 3166) and ends with an 11-digit number and one ‘check’ digit for error detection.

Who needs a DIN?

Acquiring a DIN is mandatory for all directors and alternate directors who are acting in the capacity as director (regardless of whether they are actually called a “director”) unless they are exempt.

This requirement applies to a director of the following types of entities:

(a) a company, registered foreign company or registered Australian body (which are registered under the Corporations Act; or

(b) an Aboriginal and Torres Strait Islander corporation (which are registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act)).

However, the following people are exempt from obtaining a DIN:

(a) other company officers such as company secretaries (but this may later be extended by regulation);[2]

(b) external administrators;

(c) a person running a business as a sole trader or partnership;

(d) a person referred to as a ‘director’ but who has not been appointed as a director under the Corporations Act or the CATSI Act;

(e) a director of a registered charity with an organisation type that is not registered with ASIC to operate throughout Australia; or

(f) an officer of an cooperative, unincorporated association or incorporated association established under state legislation (unless also a registered Australian body).

How do I apply for a DIN?

The DIN application is free and will be available from November 2021 through the electronic platform provided by the Registrar at ABRS. It is required that the director first set up a myGovID before starting the application.

A director must apply for their own DIN because they will need to verify their identity. No one can apply on their behalf unless the Registrar is satisfied that the director is unable to make the application on their own behalf.

The Registrar must provide a director with a DIN after receiving an application if the Registrar is satisfied that the director’s identity has been established, but the Registrar can only allocate a DIN if the director applies for one.

What do I need to provide in the application?

Per the data standard, in order to complete the identity verification, the Registrar may require and collect the following information of a director:

(a) names and former names;

(b) addresses and former addresses;

(c) contact details;

(d) date and place of birth; and

(e) tax file number (but this can only be requested, not compelled).[3]

The Registrar may request and collect other information necessary to establish a director’s identity if it is not satisfied that the individual’s identity is established.

When making an application, the director must make a declaration that:

(a) they are the applicant identified in the application;

(b) the information provided is true and correct;

(c) the individual is an eligible officer, or intends to become an eligible officer within 12 months of applying for a DIN; and

(d) the individual does not already have a DIN, or the individual has been directed by the Registrar to apply, or apply again, for a DIN. [4]

Once a director has a DIN, they must inform the Registrar of any errors or corrections to the information that are required.

When do I need to apply for a DIN?

The date in which a DIN is required depends on the date that person became a director.

For directors appointed under the Corporations Act, see the below table:

The above timeframes do not apply to corporations under the CATSI Act, which have extended application periods in which new directors are required to apply for a DIN, being:

(a) 30 November 2023 (for directors appointed on or before 31 October 2022); or

(b) before appointment (for directors appointed from 1 November 2022).

What if I don’t obtain a DIN?

There are civil and criminal penalties that may apply for directors who fail to obtain a DIN in the required timeframe or if directed by the Registrar to do so.

Under the new law civil and criminal penalties will also apply where individuals:

(a) misrepresent or provide a false a DIN to a government body or registered body;

(b) knowingly apply for multiple DINs; or

(c) are actively involved in the contravention of any of the above offences.

A contravention of these obligations is both a civil penalty and an offence. This allows the regulator or prosecutor (as the case may be) to take enforcement action proportionate to the action that constituted the breach. The Registrar may also issue infringement notices in relation to such conduct.

The commercial team at Mahoneys is experienced in corporate matters. If you have any queries about the implications of this ruling, please contact Mahoneys commercial Partner, Antony Harrison, or associate lawyer Nicola Whalley on (07) 3007 3777 or aharrison@mahoneys.com.au or nwhalley@mahoneys.com.au.

[1] Business Set-up, Transfer and Closure, Productivity Commission Inquiry Report, Australian Government Productivity Commission, No. 75, 30 September 2015

[2] Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, Explanatory Memorandum  [2.19]

[3] Corporations (Director Identification Number) Data Standard 2021

[4] Ibid.

Written by Nicola Whalley

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