Draft legislation to modernize the business registry regime is currently under review in parliament. The new laws include the establishment of a Director Identification Number (DIN) for all company directors to prevent illegal Phoenixing Activities.
Phoenixing occurs when controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transfer assets to a new company. The total cost to the Australian economy is estimated between $2.9 and $5.1 billion annually, through unpaid taxes, losses by creditors and unpaid wages, superannuation, and entitlements to employees.
If passed, the new Act called the Commonwealth Registers Act 2018 will require all company directors to confirm their identity and be issued a unique DIN. Only appointed and acting alternate directors will be subject to new laws. Shadow or de facto directors will not be required to register. Much like a Tax File Number for taxation purposes, one DIN will be issued to a director to track their directorship history across companies over time to:
- Assist regulators trace repeated unlawful activity
- Prevent the use of fictitious identities
- Reduce time for and cost for administrators and liquidators
- Improve data integrity and security, allowing directors to be identified by a number across registers rather than more personal details.
The Act will also streamline business registries, bringing 35 current registers under the new regime, including ASIC’s companies register and the ATO administered Australian Business Register. The single platform will be administered by the Australian Business Registrar within the ATO and provide flexibility in the use of technology to improve user experience and simplify interactions with government business registers.
No dates have been advised for when final legislation will be put to parliament or when director applications for a DIN will begin.
Should you have any questions on how this new legislation applies to you, please contact your Altitude Adviser.