The Government recently passed Bills to amend the Corporations Act 2001 to introduce a ‘Director Identification Number’ (DIN).
All company directors will be required to prove their identity and will be issued a permanent DIN which will follow them to all companies to which they become a director.
These measures are aimed to assist regulators to investigate unlawful corporate activity including ‘phoenix activities’.
Phoenix Activities can be described as the process where a business is transferred from one company to another, leaving the original company with unpaid liabilities to be put into liquidation, while the new company continues the business. The business rises from the ashes of the old company, like a Phoenix rising from the ashes of a fire.
There is concern that some directors connected with such phoenix activities may be shirking their corporate responsibilities and obligations, so the DIN will enable easier tracking of directors.
While there are obvious merits to the new laws, some view the new process as more Government ‘red tape’. This will certainly slow the process of establishing a new company for an individual that has never previously obtained a DIN.
Questions remains about how the identification process will work, including for foreign directors. Already the Federal Government’s ‘MyGovID’ has caused issues for businesses with Foreign individuals validly in Australia under a visa being unable to obtain sufficient documentation to obtain MyGovID to submit business documents to State and Federal authorities such as the Australian Taxation Office.
There is a two year implementation period for issue of the DIN, so we hope such issues are adequately addressed before the rules are launched.
If you have any questions regarding the introduction of DINs or other matters relating to company director responsibilities, please contact your usual Mazars advisor or alternatively contact one of our specialists:
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