04 Nov Taming The Phoenix
Late last year & Legal alerted our client base via our website of the federal government’s proposed measures to enact anti-phoenixing laws.
The proposed silver bullet is the introduction of the DIN – Director Identification Number.
The DIN is a unique identification number issued to eligible individuals, which once issued, will remain with that individual for life and will relate to all directorships held by that individual.
From the outset the DIN will apply to any “eligible officer”.
Why Is This Law Being Introduced?
Illegal phoenixing activity involves deliberately avoiding the payment of liabilities by shutting down an indebted company and transferring the assets to another company. Apart from helping to shut down such activity the Government also anticipates that the use of the Din will greatly improve the traceability of directors across companies, thereby preventing director identity fraud and allowing regulators to track directors of failed companies more efficiently and in the process, reducing instances of insolvency.
Who Needs to Apply?
A person must apply for a DIN if they are an eligible officer of;
- A company, a registered Australian body, or a registered foreign company under the Corporations Act 2001 (Cth); and/or
- An Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act).
An eligible officer is a person who is appointed as (or will be appointed as from November 2021):
- A director; or
- An alternate director who is acting in that capacity.
From November 2021, directors of Australian companies will be able to use the ABRS (Australian Business Registry Services), to apply for a DIN. Directors must apply for a DIN themselves (and cannot have anyone else apply on their behalf) given that they will need to verify their own identity. In addition, the Australian Taxation Office (ATO) has released the relevant timeframes within which directors must apply for their DIN as well as guidance on how to apply for one.
When Do Directors Need to Apply?
- Directors appointed on or before 31 October 2021 must apply by 30 November 2022
- Directors appointed between 1 November 2021 and 4 April 2022 must apply within 28 days of appointment
- Directors appointed from 5 April 2022 must apply for a DIN before their appointment.
* Slightly more generous dates apply for CATSI Act directors (refer MBR guidelines).
How Do Directors Apply?
From November 2021, directors can apply for a DIN by logging into ABRS online by using the myGovID app. (If the director does not have a myGovID, they can find information on how to download the app here.
Applicants must prove their identity by answering two questions based on documents listed on the site. Providing an individual tax file number is optional but is expected to speed up the process.
Are There Penalties for Non-Compliance?
The DIN comes with certain obligations, such as applying within the relevant time frame, not applying for more than one DIN, and not misrepresenting the Din to any companies or registered bodies.
Directors who fail to meet their obligations may be issued with an infringement notice. Directors who fail to apply for a DIN may be regarded as having committed an offence which under the Corporations Act may attract civil or criminal penalties ranging from $12,600 to $1,050,000.
Disclaimer: This information is for information purposes only and is not legal advice. Should you require further information or assistance in meeting your compliance requirements under the DIN regime then please contact & Legal.