Legislative reforms affecting the accountability of company directors of have been introduced with the passing of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 (the Bill). The Bill has been passed by both houses and is currently pending royal assent. Amendments will apply to the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006.
The amendment comes as a response to the problems arising from illegal phoenixing activity, one issue of which can be attributed to the previous lack of standardisation for the identification of company directors. The Bill has introduced the requirement for all company directors to have a Director Identification Number (DIN) for verification and accountability purposes.
The Bill provides a 12-month transitional period for all directors to obtain a DIN. The DIN will allow directors to be traced throughout changes in positions, relationships and companies. The amendments also introduce new civil and criminal penalties, such as infringement notices for individuals failing to meet their DIN requirements.
Previously, the identity of directors did not need to be verified by ASIC. Individuals were required to provide personal identification details, however this allowed for slight variations to be made and possibly false identities to remain undetected. The requirement for all directors to have a DIN reduces this risk of intentional variations being made by directors to operate dishonestly across different companies.
These changes are part of the Government’s legislative package to revise the Commonwealth registers and a positive step to combat illegal phoenixing.