Australia
DINs to Burn Illegal Phoenix Activity
17 October 2021 | Minutes to read: 3

DINs to Burn Illegal Phoenix Activity

By Garth O'Connor-Price and Matthew Lucente

What are Director Identification Numbers?

The Director Identification Number (DIN) is a 15-digit unique identifier that relevant directors will be required to apply for to assist with preventing fraudulent identities of directors and to combat illegal phoenix activity.

In 2020, the Federal Government announced the Digital Business Plan when the Modernising Business Registers (MBR) program was announced. This MBR program involves the consolidation of 30 Australian Securities and Investments Commission (ASIC) and Australian Business Register (ABS) business registers and will be managed by the new Australian Business Registry Service (ABRS).

What are the benefits of Director Identification Numbers?

The DINs are a part of MBR program assist insolvency practitioners and regulators detect directors engaging in unlawful behaviour such as illegal phoenix activity which involves the process of deliberately liquidating a company to defeat creditors. It includes stripping assets of a company and transferring them at minimal consideration to a new entity for the purpose of carrying on essentially the same business whilst avoiding creditors.

Common warning signs of illegal phoenix activity for insolvency practitioners include unpaid superannuation and unpaid employee entitlements. Directors with two company failures or more account for $1.6 billion of outstanding employee entitlements over past 10 years. Other features are significant debt to the Australian Taxation Office, similar business name in new company and pre-appointment sale of assets to a related party. Illegal phoenix activity is estimated to cost the Australian Economy between $2.9 billion and $5.1 billion annually.

Insolvency practitioners will be able to investigate a director’s corporate history more effectively with the introduction of the DINs. This will reduce the time and cost of insolvency practitioners and improve the overall efficiency of the insolvency process.

The MRB program is designed to stamp out  directors changing birth details, spelling of name, and birth places to try and create confusion and avoid detection.

How will the DINs requirement affect existing directors?

An individual will need a DIN if they an eligible officer of:

  • a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act), or
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An eligible officer is a person who is appointed as:

  • a director, or
  • an alternate director who is acting in that capacity.

If you are appointed as a director under the Corporations Act on or before 31 October 2021 you must apply for a DIN before 30 November 2022.

If you are appointed as a director under the CATSI Act you on or before 31 October 2022, you must apply for a DIN before 30 November 2023.

Each Director must apply for their DIN  by verifying their personal identity. Directors are not able to have anyone else apply for their DIN on their behalf.

How will the DINs requirement affect new directors?

Depending on when someone becomes a new director will affect when they must apply for a DIN.

Date you become a director under Corporations Act  Date you must apply
Between 1 November 2021 and 4 April 2022 By November 2022
From 5 April 2022 Before appointment

 

Date you become a director under CATSI Act  Date you must apply
From 1 November 2022 Before appointment

How do directors apply for a DIN?

Directors will need to apply for DINs through the new ABRS website.

A director will only ever have one DIN and it is a way to verify their identity. It is important to monitor when this law is applicable as there will be new civil and criminal penalties for directors failing to apply for a DIN in the applicable timeframe..

There will also be criminal penalties for deliberately providing false identification information to the registrar, intentionally providing false DIN to a Government body or relevant body corporate, and intentionally applying for multiple DINs.

For more information, please contact your local Restructuring and Insolvency advisor.

 

DINs to Burn Illegal Phoenix Activity

Garth O'Connor-Price

Garth is a Principal in our Restructuring & Insolvency division. Garth specialises in SME distressed situations and draws on his experience to tailor solutions to client distress including voluntary administration, strategic restructuring advice, liquidation and safe harbour protection. He is a Chartered Accountant and holds ARITA’s Advanced Certifications in Insolvency and Restructuring & Turnaround.

Read more >
DINs to Burn Illegal Phoenix Activity

Matthew Lucente

Matthew is an Intermediate Accountant in our Melbourne CBD Restructuring and Insolvency (R&I) team. He uses his experience to assist in Insolvency matters that include Liquidations, Voluntary Administrations and Expert Witness Reports. He holds a Bachelor of Business (Professional Accountancy) from RMIT University and is currently completing his Chartered Accounting qualification.

Read more >
Related Insights

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Be Informed

Be Informed is William Buck's regular newsletter, filled with up to date news and relevant advice for individuals and businesses.

Get in touch!