If Elvis Presley or Bob Marley wanted to register as a company director in Australia, could they?
That was the question asked by Senator Peter Whish-Wilson to ASIC commissioner John Price, during a meeting of the Parliamentary Joint Committee on Corporations and Financial Services. The answer from Mr Price…..“Quite possibly!”
The reality is that the Australian corporate regulator has only been responsible for the registration, not the identification, of company directors, leaving the door open for companies to register dummy directors. This is believed to have led to unlawful activity, including phoenix activities, by company officers. Phoenix activities are essentially where a business is transferred from a company in financial distress to a new company, leaving creditors of the old company with little recourse.
All this is set to change with the recent passing of legislation to introduce Director Identification Numbers (DIN) for directors of Australian companies. The DIN regime will require all directors to confirm their identity to a unique identifier that will be theirs for their lifetime, even if they cease to be a director.
The DIN will be publicly available, unlike the Tax File Number, which is subject to privacy restrictions. It will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies, and preventing the use of fictitious identities.
The federal government has allowed 2 years for the development of a regulatory framework for these new rules, with ASIC planning to build the DIN system on a more modern technology platform, rather than its current antiquated system.
The corporate regulator has stated that the DIN measure will tie in well with the recently passed illegal phoenixing legislation, which extends the director penalty regime to Goods and Services Tax (GST), Luxury Car Tax (LCT) and Wine Equalisation Tax (WET) liabilities.
According to ASIC executive director Warren Day, “A director identification number coupled with [the new measure] will now be quite powerful because we will know it is that person. It won’t be a Bob Marley or others. It won’t even be an incorrect person. It will be the right person, so identity won’t be a problem,”
We will keep you informed as the new system evolves.