Attention all Company Directors – Incoming Director Identification Numbers
3 February 2021
Highlights
- Michelle Cowan, Senior Associate at ACS Queensland’s Preferred Legal Partner Active Law steps through the incoming Federal Government Director Identification Number scheme, and what it means for you as a Company Director.
The federal government is bringing in a new regime whereby every company director will be assigned a lifetime unique “Director Identification Number” or “DIN.”
Why?
One of the driving forces behind this new regime is to combat phoenixing. Phoenixing is when directors deliberately avoid paying liabilities by shutting down the company and transferring any assets to a new company. The aim of the new regime is to help prevent fictitious directors, make directors more accountable for their activities and to enable tracing and potential prosecution of directors of failed companies.
Do I need a DIN?
The DIN regime will apply to all company directors. Once allocated, the DIN is for life and will remain with you as director for all current and future directorships. You cannot have more than one DIN and there are penalties (see further below) if you do so.
When do I have to apply for a DIN? Watch this space.
Not yet but preparation is key.
The new federal laws amending the Corporations Act 2001 (Cth) were passed on 12 June 2020 and it is anticipated will come into force sometime in the first half of 2021. Once the laws are in force:
1. During the 1st twelve months, directors will have 28 days to apply for a DIN after their appointment. Thereafter, all directors must apply (if they don’t already have one) before being appointed as a director.
2. Existing directors will have a grace period within which to apply for a DIN. At this stage, we do not know how long that period will be.
How can our business prepare for the new regime?
Full details are yet to be released on what information will be required to apply for a DIN.
The new regime does present some practical challenges, particularly if proper planning is not in place. For example, under the new laws, prospective directors may apply for a DIN up to 12 months prior to appointment. After 12 months if they have not been so appointed, this will lapse and will need to apply again.
In these circumstances, current directors should give careful consideration and forward planning of key people within the business that are most likely to be appointed if required to step in on an urgent basis and to have them apply for a DIN. Think of it as having a pool of potential directors that the company can turn to as and when required.
Key Takeaways
- All company directors will be required to have a DIN.
- The key drivers behind the new regime is director traceability and prevention of phoenix activities.
- There are substantial criminal (potentially up to 12 months imprisonment) and civil penalties for failing to comply with obligations under the new regime.
If you are unsure of what your obligations are under this new regime, please seek legal advice. You can contact us on (07) 3160 0000 or at reception@activelaw.com.au.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.
Active Law is ACS Queensland’s Preferred Legal Partner. ACS members receive a 10% discount on legal services up to the value of $2,000 and a 5% discount thereafter.