We can construe the DINs as an extension of the existing uniform identifier regime that includes the ubiquitous Fax File Number (TFN) tagging most adult Australians.
The Explanatory Memo states
Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2018 amends the Corporations Act and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) to introduce a director identification number (DIN) requirement.
It sets out:
• the persons to which the new requirement applies;
• the obligations associated with the new requirement;
• how the new requirement is administered; and
• the consequences of contravening the new law.
Context of amendments
2.2 Phoenixing occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company. This impacts on creditors who fail to receive payments for goods and services, employees through lost wages and/or superannuation entitlements and the general public through lost revenue to the Government. The total cost of phoenixing to the Australian economy is estimated to be between $2.9 billion and $5.1 billion annually.
2.3 The Commonwealth Government currently has a number of initiatives underway to deter and penalise phoenix activity in order to protect those who are negatively affected by such fraudulent behaviour. One initiative is the introduction of a DIN, which the Government announced on 12 September 2017.
2.4 The DIN will require all directors to confirm their identity and it will be a unique identifier for each person who consents to being a director. The person will keep that unique identifier even if their directorship with a particular company ceases. As such, the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identities. This will assist regulators and external administrators to investigate a director’s involvement in what may be repeated unlawful activity including illegal phoenix activity.
2.5 To date, although the law has required that directors’ details be lodged with ASIC, it has not required the regulator to verify the identity of directors. This verification aspect of the DIN will improve the integrity of the data and help with enforcement action associated with phoenixing.
2.6 The new DIN regime will also offer benefits beyond combating phoenixing. For instance, simpler more effective tracking of directors and their corporate history will reduce time and cost for administrators and liquidators, thereby improving the efficiency of the insolvency process. In addition, the new regime will improve data integrity and security, including by allowing directors to be identified by a number rather than by other more personally identifiable information such as their name and address.
2.7 The introduction of a DIN was recommended by the Productivity Commission in its September 2015 final report into Business Set-up, Transfer and Closure. In the report, the Productivity Commission noted its confidence that the introduction of a DIN would likely be of significant net benefit to the community as a whole.
Summary of new law
2.8 The new law amends the Corporations Act and the CATSI Act to introduce a DIN requirement. The new requirement assists regulators to better detect, deter and disrupt phoenixing and improves the integrity of corporate data maintained by the registrar.
2.9 Under the new requirement a person appointed as a director of a body corporate registered under the Corporations Act or the CATSI Act must apply to the registrar for a DIN. The person has 28 days to apply from the date they are appointed a director unless they are provided an exemption or extension by the registrar. After receiving an application, the registrar must provide the director with a DIN if the registrar is satisfied that the director’s identity has been established.
2.10 The registrar is provided with powers to administer the new requirement. These include powers to: issue DINs; keep necessary records; cancel and reissue DINs; determine the numbering plan for the new requirement; and, determine how directors are to establish their identity. The registrar may make data standards, by way of legislative instrument, in relation to these and other matters.
2.11 There are civil and criminal penalties for directors that fail to apply for a DIN within the applicable timeframe. The registrar, or a senior member of its staff, may also issue infringement notices in relation to such conduct. There are also civil and criminal penalties which apply to conduct that would otherwise undermine the new DIN requirement. For example, there are criminal penalties for deliberately providing false identity information to the registrar, intentionally providing a false DIN to a Government body or relevant body corporate, and intentionally applying for multiple DINs.