Director Identification Number

As part of the 2018-19 budget, the Government announced changes that amend the Corporations Act 2001 and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) to introduce a Director Identification Number requirement.

Under the new law, once passed, which is currently in its final stages of draft approval, every director must apply to the registrar for a Director Identification Number within 28 days of appointment, unless the registrar provides an exemption or extension. Once satisfied that the director’s identity is verified, the registrar will provide the director with a Director Identification Number. 

Proposed transitional provisions say that current directors will have 15 months to apply for a Director Identification Number  from when it becomes law.

Initially, the Director Identification Number requirements will apply to only appointed directors and acting alternate directors.

One of the major reasons for the Director Identification Number is to assist regulators and external administrators to investigate director involvement in what may be repeated unlawful acts as a director, particularly including illegal phoenix activity. Phoenix activity occurs when company controllers deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company and recommences trading under a different brand. 

Tracking directors involved in past phoenix activity may also allow the ATO to request bonds when those directors seek to operate future businesses (i.e. request a new ABN) to provide some certainty for the payment of future taxation obligations.

Significant civil and criminal penalties apply to Director Identification Number contraventions. The registrar may also issue infringement notices in relation to some contraventions. The maximum penalties applicable to each obligation currently proposed are detailed in the below table.

Breaching either of obligations 1 or 2 in the table is a ‘strict liability’ offence, meaning that it negates the condition to prove fault (or intention of fault) and is assessed on a pure matter of fact (for the regulator or prosecutor, as the case may be).  That is to say, you either complied or you didn’t.  The Government states that imposing strict liability to these obligations is necessary to ensure the integrity and compliance of the new Director Identification Number requirement that relates to corporate regulation.  Each criminal penalty unit is currently worth $210.

Civil penalties also apply to those involved in contravening any of the obligations.  Further, they provide that a person can be an accessory to a breach, and is so involved if the person has aided, abetted, counselled, procured, induced or been knowingly concerned or a party to the contravention, or has conspired with others to effect the contravention.  It is therefore important that all advisor’s to company’s are aware of the new Director Identification Number regime.

Obligation Corporations Act Penalty
1.       Apply for a Director Identification Number within 28 days of appointment 60 Penalty Units (Criminal)

$200,000 fine(individual) or $1m (body corporate) – (Civil Penalty)

2.       Apply for a Director Identification Number if directed by registrar 60 Penalty Units (Criminal)

$200,000 fine(individual) or $1m (body corporate) – (Civil Penalty)

3.       Applying for additional Director Identification Numbers 100 Penalty Units or 12 months imprisonment or both (Criminal)

$200,000 fine(individual) or $1m (body corporate) – (Civil Penalty)

4.       Misrepresenting a Director Identification Number 100 Penalty Units or 12 months imprisonment or both (Criminal)

$200,000 fine(individual) or $1m (body corporate) – (Civil Penalty)

5.       Accessorial liability (being involved in a contravention of one of the above obligations). $200,000 fine(individual) or $1m (body corporate) – (Civil Penalty)

 

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