The Government of Australia is moving towards improving the efficiency of Australian business and the accountability of directors running businesses by implementing special identification numbers for directors.

Proposed law amends the Corporations Act and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI) to initiate a director identification number (DIN) requirement. In accordance with the proposed new requirements, from now on directors of corporations registered under the CATSI Act must apply for an identification number within 28 days as of the date of their appointment.

The main purpose of the amendment is to promote good corporate conduct. Mainly, the new rule assists regulators to identify and address unlawful behavior, such as “phoenixing”. Phoenix activity is the process of avoiding settlement of liabilities by selling of the company’s assets and its liquidation, while creating another entity to which the assets are moved for little or no compensation and then maintaining the same business.

Existing directors will have 15 months to apply for the DIN as of the date the amendments come in force. Directors of all Australian companies are set to be subject to the new DIN conditions. This includes directors of companies that are liable for managed investment schemes and registered charities.

The DIN will oblige all of the directors to verify their personality and there will be a special identifier for each person who consents to be a director. The person will keep that unique number even after their directorship with a particular company is terminated. For this reason, the DIN will allow tracing of a director’s relationships across companies, allowing advanced tracking of directors of failed businesses and will prohibit the use of false identities.

There will be fines for those who fail to meet new requirements. As an example, failure to comply with the condition to apply for a DIN within 28 days of appointment might lead to a penalty in amount of USD $200,000 for an individual; or 1 million of USD for a legal entity.

If you are unsure about the new regulations and what effect they will have, it might be the right time to seek a professional advice. Offshorelicense has an outstanding expertise and are able to provide relevant legal assistance. Bear in mind, the earlier that professional advice is sought the more successful the result may be.