Proposed introduction of Director Identification Numbers

On 1 October 2018 the Government released the first tranche of draft legislation to facilitate Modernising Business Registers and provide the legal framework for Director Identification Numbers (DINs).

The draft legislation

One portion of the draft legislation proposes a new Commonwealth Registers Act and will cover 35 existing business registers. This includes the Australian Business Register, the Australian Company Number Register, the Business Names register, various professional registers, various registers of banned or disqualified persons and other information registers.

Essentially the prescription of the requirements relating to the above registers in various laws will be replaced with the requirements for data standards and a disclosure framework. Data standards and a disclosure framework will be developed and treated as disallowable instruments for the purpose of the Legislation Act 2003.

The explanatory memorandum explains that this approach to replace the prescriptive requirements in the various Acts will enable a more efficient and effective administration of registry services, as data standards and disclosure frameworks can be readily amended over time.

The application to DINs

The other proposed law amends the Corporations Act 2001 and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) to introduce a DIN requirement.

What are the key obligations, and who do they apply to?

The key obligations regarding DINs would be to:

1. Require an eligible officer to apply for a DIN within 28 days of being appointed as a director
2. Require an eligible officer to apply for a DIN within 28 days of being directed to do so by the registrar
3. Prohibit a person for knowingly applying for multiple DINs
4. Prohibit a person from misrepresenting a DIN to a government body or registered body.

“Eligible officers” initially covers only appointed directors and acting alternate directors of registered bodies. However, the definition may be extended to any other officers of a registered body, such as company secretaries. A registered body being a company, registered foreign company or registered Australian body, or an Aboriginal and Torres Strait Islander corporation.

What penalties exist?

The first two obligations noted above attract a strict liability offence and civil penalty provisions. They are also subject to an infringement notice regime. The maximum penalty units are 60, currently equating to $12,600.

The second two obligations noted above attract an offence and civil penalty provision. The maximum penalty units are 100, currently equating to $21,000, or imprisonment for 12 months or both.

What are the transitional provisions?

Transitional provisions apply in relation to a person that is currently appointed as a director at the time the new requirement commences – they will have 15 months to apply for a DIN.

Who can apply for a DIN?

The proposed law provides for two categories of person that may apply for a DIN:

• Directors
• Persons who are not directors but intend to become directors within 12 months.

Impact on the current requirements in relation to notification of director details to ASIC?

The new legislation retains the substance of the existing requirements but:

• provides that the company must lodge the relevant notice with the registrar (rather than ASIC); and
• rather than prescribing the relevant personal details (currently contained in s205B(3) of the Corporations Act which is proposed to be repealed), provides that the notice must meet any requirements of the “data standards”.

What are data standards?

Data standards have not yet been made available. However, the explanatory memorandum notes that in respect of a DIN application, data standards may include how a director’s identity is established, how the DIN records are stored, how a person applies for a DIN and how the registrar may check or validate the accuracy of the records.

What is the disclosure framework?

The disclosure framework is not yet available. However, the explanatory memorandum notes that this framework may provide for matters such as circumstances where the information may be disclosed to the general public, any conditions on the disclosure of information and circumstances in which information must not be disclosed without the consent of the person to whom it relates.

Commencement date

If passed, the new requirement will commence on a date set by proclamation, so that administrative arrangements supporting the new regime are in place. However, if any provisions do not commence within 24 months of the Bills receiving Royal Assent, they automatically commence the day after the end of that period.

AICD engagement

The AICD will be responding to the draft legislation by the submission close date of 26 October 2018. To date, we have had substantial engagement with government on DINs and will be continuing to engage with government on the legislation as well as the development of the data standards and the disclosure framework.

In order to obtain input from the membership we have undertaken member surveys, engaged with our policy committees and Division Councils and some members have agreed to participate in workshops with government.

While supporting the introduction of DINs, we wish to see the removal of directors’ personal information from the public register (at the same time as the roll-out of DINs) due to concerns over identity fraud and safety and security issues of directors. We expect these matters will be considered as the disclosure framework is developed, and we will be active and vocal participants in this process.