Director Identification Numbers

The Legislation

Originally announced in September of 2017, legislation for the DIN received assent on 22 June 2020. Schedule 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2019 (Cth) (‘TLA Act) amends the Corporations Act 2001 (Cth) (‘Corps Act’) and Corporations (Aboriginal and Torres Strait Islander) Act 2001 (Cth) (‘CATSI Act’).

The TLA Act introduces the requirement to apply for a DIN as well as associated penalties for noncompliance. The legislative package which was passed alongside with TLA Act introduces the role of ‘Commonwealth Registrar’ (‘Registrar’), to whom applications for a DIN will be made.

Prior to the TLA Act, the Australian Securities and Investments Commission (‘ASIC’) required the personal details of directors to be lodged as an aspect of registration of a body corporate. These personal details however were not verified by an independent body and may hide the true details of directors.

1. Elements of the DIN regime are as follows:-directors of a body corporate governed by the Corps Act or CATSI Act must apply for DIN;
2. a DIN issued in respect of the person will apply permanently;
3. a person may not have more than one DIN;[2];
4. Directors will be required to verify their identity with the Registrar to be issued with a DIN; and
5. there are severe penalties for failure to register

The TLA Act will commence by proclamation, which must be made within 24 months of its assent, being 22 June 2020. While there is no date set officially, the Australian Financial Review has suggested that the TLA Act will commence mid-2021

The Comment

The TLA Act is silent on the documentary requirements. In fact, the TLA Act refers to the “satisfaction of the Registrar” to impose requirements to verify Directors’ identities. It will be interesting to see whether the Registrar requires the industry standard ‘100 point identification’, as is required when opening a bank account[3] or applying for official government identification documents.

This alone would capture the simpler instances of directors with more than one name, such as registering for multiple separate body corporates with variations on the spelling of one’s name (and or ‘anglicisations’ of names). In the 2015 Economics Reference Committee report on insolvency in the construction industry,[4]

evidence was tendered of one such example.- Mr Frank Nadinic had registered himself as director of over 30 companies under the names Frane Nadinic and Frank Nadimic.[5]

Whilst this was not done with any improper intent, implementation of the ‘100 point identification’ method, ASIC as well as creditors, would have plainly identified Mr Nadininc and his range of names as the same person.

The introduction of DINs offers creditors another safety measure. As above, the DIN will include the details of the director’s current name andany former given and family name.[6]

For creditors who deal with directors trading concurrently with an anglicised and legal name, proper records should avoid confusion as to a director’s true identity.

It remains uncertain whether directors’ residential addresses will be included in the DIN register. It is possible the Registrar may implement the registration of a director’s personal service or correspondence address, as suggested by the Australian Institute of Company Directors in 2018.[7]

This would streamline the process of commencing proceedings against directors personally. ASIC’s records pertaining to directors’ personal information are presently unverified. For creditors, access to a service or correspondence address could simplify service of court documents and may provide an alternative means of effecting service of a statutory demand, assuming section 109X of the Corps Act is accordingly amended. Whether the measures will be that strict remains to be seen but TAL Act is promising.

Moving forward, the introduction of the DIN will possibly give more weight to personal guarantees signed by directors. Where credit facilities are provided to corporations guaranteed by directors, it may be prudent that loan application paperwork require provision of director DINs as another layer of protection for credit provider. The verified personal information registered as part of the DIN may aid in support of the lodgement of a caveat pursuant to an apt charging clause, or even in the service of documents.

Ultimately, it remains to be seen how the Commonwealth Registrar will administer its powers to mandate what personal information will be required of directors for the purposes of their DIN.

The introduction of the DIN may have been a long time coming but its introduction should dampen corporate phoenix-ing and grant some reassurance to creditors.