The Commonwealth Parliament of Australia recently passed the Commonwealth Registers Act 2020, which — upon commencement and with amendments to existing legislation — will require directors of Australian companies to apply for and be issued a unique Director Identification Number (DIN). A new Commonwealth Business Registry will replace the register maintained by the Australian Securities and Investments Commission (ASIC) and the Australian Business Register, which is maintained by the Commissioner of Taxation.
The aim of the new act is to enable better tracking of directors and their corporate histories and assist in the fight against illegal “phoenix” activity. The Australian Taxation Office (ATO) defines illegal phoenix activity as follows: “[W]here a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements.” According to the Explanatory Memorandum for the enabling legislation, illegal phoenix activity is estimated to cost the Australian economy between A$2.9 billion and A$5.1 billion annually.
As part of a broader suite of legislation designed to modernize and streamline the way various registers are maintained by government entities, the act includes civil and criminal penalties for directors who fail to apply for a DIN within a specific time frame and who attempt to apply for multiple DINs. The new regime is also intended to assist insolvency investigations by external administrators, including through enhanced tracking of a director’s involvement in failed corporations and unlawful activities, and will combat the use of fictitious identities.