In the aftermath of the Banking Royal Commission, the government is increasingly concerned with accountability and governance. In December 2019, the federal government introduced several bills to Parliament. On 12 June 2020, the legislative package passed both houses of Parliament. The package included the following Acts:
- Commonwealth Registers Bill Act 2020
- Treasury Laws Amendment (registries Modernisation and Other Measures) Act 2020
- Corporations (Fees) Amendment (registries Modernisation) Act 2020
- National Consumer Credit Protection (Fees) Amendment (registries Modernisation) Act 2020
The Acts received Royal assent on 22 June 2020. It will come into effect on a day fixed by proclamation, which is expected to be sometime in the first half of 2021.
What is the purpose of DIN?
There are two main purposes of the Acts.
- To combine and consolidate the Australian Business Register (run by the ATO) and the 34 ASIC registers into a single streamlined system.
- Introduce the Director Identification Number (DIN).
Under the current system, creditors, regulators, and legal practitioners had difficulty tracking company directors, particularly when companies became insolvent. Directors often had multiple entries on the various registers, at times with slightly varying names (such as with or without a middle name). This enabled directors to escape scrutiny and accountability. In particular, it enabled illegal ‘pheonixing’ activity, where directors shut down an insolvent company and transfer its assets to a newly created one to avoid liabilities.
By consolidating the registers and requiring directors to obtain a DIN, the government hopes to make directors and their activities more traceable and accountable.
How DIN works
The various registers will be consolidated into one Commonwealth Business Registrar (‘Registrar’), which will be administered by the ATO. However, ASIC will still retain many of its regulatory and enforcement functions. The ATO is authorised to create the ‘data standards’ – a subordinated legislative instrument which with govern the administration of the Registrar. The data standards are expected to be made in the coming months.
All company directors will be required to obtain a DIN.
- For the first 12 months after the Acts come into effect, new directors must obtain a DIN within 28 days of being appointed.
- After 12 months, new directors must obtain a DIN before the appointment. This will have the effect of limiting appointments made on an urgent basis.
- Existing directors will have a 15-month window to apply for a DIN once the Acts come into effect.
Civil penalties apply for failing to obtain a DIN, while criminal penalties apply for abusing the system (such as applying for multiple DINs).
The full system is expected to be rolled out over the next few months, so make sure you keep an eye out for when the requirements come into effect. If you have any questions or require any assistance in obtaining a DIN, please do not hesitate to contact us.