Changes for Directors: Your obligations under the Director Identification Number Scheme

Changes for Directors are imminent: Your obligations under the Director Identification Number Scheme

As of 1 November 2021, the Director Identification Number (DIN) Scheme comes into effect as part of a series of systemic changes that have been occurring with ASIC and the ATO to streamline the organisations and crack down on ‘Phoenixing’ (i.e. the shuffling of a business to a new entity of little to no value to avoid creditor/employee/taxation liabilities).

After years of attempts to regulate the matter (which is estimated by the Fair Work Ombudsman in 2018 to cost the economy some $2.85 to $5.13 billion dollars annually) the government has settled on requiring all directors to register for and use a DIN; essentially a unique ID that will be registered with the Federal Government and used with ASIC for any companies an individual is a director of. This, in theory, is to prevent directors from transferring assets and shuttering companies only to continue the same business while avoiding their legal obligations in ways that might otherwise allow them to escape a claw-back under an insolvent trading claim.

The DIN Scheme requires an application first for a myGovID account and verification of identity documents that will be uploaded to give an account a certain ‘strength’ rating. From there one links their myGovID and applies for a DIN with the ABRS website to obtain their DIN. While the website claims the application itself will take only 5 minutes, it is unclear whether applications are automatically processed and granted or manually reviewed, so it is important to be proactive in obtaining a DIN, given failing to hold a DIN (along with holding multiple DINs, providing false DINs, or providing false information in applying for a DIN) can result in civil or criminal penalties of up to 60 units ($222 per unit) or a year’s imprisonment.

However, existing directors will have to 30 November 2022 to obtain a DIN (though not if they wish to become a director of another company) and new directors will have 28 days from becoming a director before 4 April 2022 to obtain a DIN. After 4 April 2022, however, it is important to be proactive and obtain a DIN before becoming a director, so it is in effect an important cut-off date where time may be of the essence in starting a company or transferring directorial responsibilities.

It should be noted, the DIN Scheme not only applies to those given the title of Director but to Alternate Directors and those who perform the duties of either role regardless of what the job description is called.

At Ezra Legal, we have experience in all stages of corporate governance, from assisting in establishing companies, to providing advice on restructuring your business, to guiding you through selling / acquiring a business while ensuring you meet all your legal obligations. For initial advice, call us on 8231 6100 or email Ashik Ibrahim

Ashik Ibrahim

Solicitor

Ezra Legal

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