Since 2014, Commonwealth, state and territory agencies have been engaged in a “whole-of-government” approach to tackling illegal phoenix activity. As part of that approach, a number of initiatives have been implemented and/or are being rolled out. These include:
- the establishment of the “Phoenix Taskforce” headed by the Australian Taxation Office which was established to bring together various federal, state and territory agencies tasked with identifying and stopping illegal phoenix activity;
- the roll out of the Modernising Business Register (MBR) program which includes the establishment of the Australian Business Registry Services (ABRS);
- the introduction of various legislative provisions which further regulate the conduct of company directors, including restrictions on resignations by directors and the introduction of the director identification number (director ID).
As part of the MBR and the ABRS, the Corporations Act 2001 (Cth) was amended in April 2021 by inserting a new Part 9.1A which establishes the director ID regime.
Director ID regime
Under part 9.1A, all eligible officers, including company directors, will be required to apply for and obtain a director ID. A person who is not an eligible officer (e.g. a person who is not yet a director) may apply for a director ID if they intend to become an eligible officer within 12 months after applying and they do not already have a director ID.
The legislative intent is that an eligible officer will, except in certain circumstances, only ever be issued with a single director ID and only persons with a director ID will be entitled to act as company directors. To this end, it is an offence for an eligible officer not to have a director ID.
Anyone who has been assigned a director ID is prohibited from applying for an additional director ID unless they are directed by the Registrar to do so. It is an offence for a person to intentionally represent to a Commonwealth body, company or registered body, as the director ID of the person or another person a number that is not the director ID of the person to which it is said to relate.
The regime imposes accessorial liability such that a person who is involved in a contravention and not just the contravening party may be found to have committed an offence under the relevant provisions. Strict liability applies to many of the provisions including the failure to obtain a director ID, applying for more than one director ID and misrepresenting particulars in respect of a director ID.
When to apply
Directors do not yet need to apply for a director ID as the regime is in the testing phase, which includes a small sample of directors invited to participate in the program.
The testing phase is slated to end on 31 October 2021. At this time, the transitional period will commence and run until 30 November 2022. ASIC is expected to provide further advice and information regarding when and how directors can start applying for their director ID, as existing directors will have from the end of testing to 30 November 2022 to apply for their director ID. Director appointments made in the transitional period must apply for and obtain a director ID within 28 days of their appointment as a director.
Under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), directors of indigenous corporations have a longer period to comply and must obtain their director ID by 30 November 2023. Upon the conclusion of the transitional period, all directors will have to obtain a director ID prior to their appointment.
Companies should therefore ensure their directors keep up to date with the transitional arrangements by visiting the ASIC and Federal Treasury websites regularly, that their records with ASIC are up to date, and all eligible officers are ready to complete their DIN application.
Matters for consideration
The accessorial liability provisions mean that accountants and advisors will need to carefully consider their role in the preparation, lodgement and/or provision of any documentation containing or purporting to contain director IDs. During the transitional period, accountants and advisors should give consideration to:
- whether or not they will lodge any documents, including with ASIC, which require the inclusion of a director ID;
- if they are prepared to do so, what systems and procedures will be in place to best ensure that the information contained in the relevant forms etc is correct;
- their procedures and processes for verifying that the person who is purporting to be a director is in fact the person to whom the relevant director ID has been issued.
