Are you a company director?
Maybe a director of the
corporate trustee of your family trust?
Then you should know that
the Government recently passed Bills to amend the Corporations Act 2001 to
introduce a ‘Director Identification Number’ (DIN).
What is a DIN for?
This means that all
company directors will be required to prove their identity because they will
have a unique DIN which will follow them to all companies to which they become
a director.
Why has this been introduced?
These
measures are aimed to assist regulators to investigate unlawful corporate
activity including ‘phoenix activities’.
Phoenixing is where a
company director may close an entity that is insolvent and transfer the assets
to a new company to avoid debts and liabilities.
It will be used to help
reduce fraud and illegal activities.
A DIN also helps to
prevent the creation of false identities and allows tracing of a director’s
previous involvement with any insolvent companies.
Things you should know
Directors are only
allowed to have one DIN even if multiple companies.
The ATO will be the
operator of the new commonwealth register.
The DIN scheme will
remove personal/sensitive information from the registry i.e. home addresses- a
welcomed measure.
You will have to make an
application prior to acting as a director if you are going to be a new director
of a company for the first time. The transitional period will enable you to
apply for a DIN within 28 days of your appointment to the Board.
Existing directors must
apply within a timeframe specified by the Registrar.
The DIN regime will also
apply to:
acting alternate
directors.
management committee
members of registered bodies such as incorporated associations with an
Australian Registered Body Number who are registered under the Corporations
Act.
directors of foreign
companies registered in Australia.
Aboriginal and Torres
Strait Islander corporations.
Consequences if you do not apply for a
DIN
There will be heavy
penalties if a director does not apply or provides false or misleading
information to obtain a DIN.
This will include
infringement notices and both civil and criminal penalties. Once the regime
commences, there will however be a 12-month transition period in place.
When will I need a DIN?
The commencement date is
not yet set and still to be confirmed however it is expected that this new law
will commence in early 2021.
How to apply for a DIN?
It is expected that the
DIN application will be completed via the MyGov system however it is unknown at
this stage.
Director Obligations
This latest legislation
should also act as a reminder to anyone who is a director or is contemplating
being a director that there are many requirements in being a director the most
common of which are your fiduciary duty to act for all shareholders, to act
honestly and to ensure the company complies with all its obligations.
Directors found wanting
in these areas can face severe penalties including jail.
Directors can also be
personally liable in instances of fraud, allowing a company to continue
operating if insolvent and to pay tax-related obligations including withholding
tax, GST, and superannuation guarantee.
Personal liability also
extends in the area of Occupational Health and Safety.
Article Source: propertyupdate.com.au
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Jason Gwerder
Thursday, 19 November 2020
