Don’t Forget to Apply for your Director Identification Number

The Government has mandated that directors of Australian companies apply for a director identification number (Director ID) by 30 November 2022. A Director ID is a unique identifier which will travel with a director for life. The Director ID is designed to prevent the use of false or fraudulent director identities.

The Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth) (Treasury Act Amendment) amends the Corporations Act 2001 (Cth) (Corporations Act), to require all company directors, or anyone who intends to become a director, to obtain a Director ID.

This amendment introduces important changes to the corporate regulatory landscape, striking down on directors and companies attempting to flout the law. The legislation is designed to increase the difficulty of phoenixing which occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company.

ASIC’s power to verify director identities

The legislation will have broader implications by improving Australian Securities and Investments Commission’s (ASIC) ability to verify the identity of directors. The explanatory memorandum of the legislation notes that it will allow for simpler and more effective tracking of directors.

Section 201A (1) of the Corporations Act provides that proprietary companies registered in Australia must have at least one director who ordinarily resides in Australia.  Section 201A (2) of the Corporations Act provides that public companies are required to have at least three directors, with at least two ordinarily residing in Australia.

It can be difficult for ASIC to investigate and prosecute directors residing overseas. Where available, the extradition process can be long and arduous. ASIC recognises this risk and can apply for orders requiring directors who reside in Australia to surrender their passports and freezing orders over company and director assets. Importantly, Director ID’s will increase the ease by which ASIC can identify companies operating without the requisite number of Australian resident directors.  

Penalties

Current penalties for breaching Director ID related obligations are outlined in the table below:

Offence

Maximum Penalty

Failure to have a director ID when required to do so

$13,200 (criminal); $1,100,000 (civil)

Failure to apply for a director ID when directed by the Registrar

$13,200 (criminal); $1,100,000 (civil)

Applying for multiple director IDs

$26,640, 1 year imprisonment or both (criminal); $1,100,000 (civil)

Misrepresenting director ID

$26,640, 1 year imprisonment or both (criminal); $1,100,000 (civil)

Further, body corporates need to be aware that if they are found to be involved in a violation under the Director ID regime they could also be fined, with the maximum civil penalty being the greater of: $10.5 million (50,000 penalty units); three times the benefit derived or detriment avoided because of the violation; or 10% of the annual turnover of the body corporate up to a maximum of A$525 million (2.5 million penalty units).

Applying for a Director ID

Australian directors who have a myGov account can start the Director ID application process by downloading the myGovID Application. Directors will then need to log into Australian Business Registry Services (ABRS) online, to start their application using their myGovID.

Australian directors who cannot access myGov services can apply via phone. Directors will be asked to provide their tax file number, residential address, and primary and secondary ID documents to confirm their identity.

Foreign directors will need to lodge a paper application providing a certified copy of their birth certificate or foreign passport, as well as certified copy of a national photo ID, foreign government identification, driver’s licence, or marriage certificate. These documents must be authorised by a notary public or staff at an Australian embassy, high commission, or consulate, and then sent to ABRS via registered post.

Lavan Comment

If you are not able to apply for your Director ID by 30 November 2022, the ABRS has indicated that if you apply by 14 December 2022, they will take no further action in relation to your late application.  If you have not applied for your Director ID, act now.

For further information or advice, contact Cinzia Donald, Partner, in Lavan’s Corporate Disputes & Investigations Team.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.