Director identification numbers

By Robert Ishak and Sasa Zekanovic

On 22 June 2020, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 received royal assent introducing a requirement that all Australian directors obtain and hold a unique Director Identification Number (DIN), issued and administered by the Australian Securities and Investment Commission (ASIC).

This requirement was introduced as a means to combat and deter corporate phoenix activity. Phoenixing is the illegal process whereby the directors/officers of a company wind up the company and transfer its assets to another company so as to avoid paying off the company’s liabilities. The Commonwealth Government estimates the cost of phoenixing to the Australian economy to be between $2.9 billion and $5.1 billion annually.

DINs are intended to deter phoenixing activity by providing greater traceability of director relationships across all Australian companies, particularly in relation to directors of failed companies, and to counter the usage of fictional identities. It also seeks to counter the practice of directors using variations in name spelling or DOBs to make searches across the various registers more difficult.

All existing company directors will be required to make an application for a DIN (within a timeframe yet to be specified). For the first 12 months following the introduction of the Act, all new company directors will have a grace period of 28 days following their appointment as a director to make an application for a DIN.

Key points

  • Directors making an application are required to provide specific personal information, as well as undergo a 100-point identity verification with ASIC.
  • Not having a DIN is a strict liability offence.
  • It is an offence to make an application for more than one DIN intentionally.
  • A director retains their DIN in perpetuity, even if they cease to be a director.
  • Foreign and alternate directors are also included under this regime.

It remains to be seen how effective these measures will be in combating phoenixing activity; however  it is definitely a step in the right direction for greater accountability and transparency of all director activity in Australia.