All Directors Need to Apply for a Director Identification Number
In June this year, laws were passed to introduce a new director identification number requirement. But what exactly is this new requirement?
All directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation will need a director identification number (Director ID).
Director identification numbers are being introduced primarily to combat ‘phoenixing’. Phoenixing describes the process where directors transfer all the assets of one company to a new company for little or no consideration and carry on the same business as the old company through the new company, usually in circumstances where the old company is in some form of financial distress.
About director ID
A director identification number (director ID) is a unique identifier you need to apply for once and will keep forever. It will help prevent the use of false or fraudulent director identities.
How director ID works
A director ID is a 15-digit identifier given to a director (or someone who intends to become a director) who has verified their identity with the (ABRS) Australian Business Registry Services.
Directors need to apply for their own director ID and it’s free to apply.
Directors will only ever have one director ID. They will keep it forever even if they:
- change companies
- stop being a director
- change their name
- move interstate or overseas.
Protect your identity
Your director ID will confirm your identity and trace your relationships to companies.
Directors have obligations under the law. You should only give your written consent to being appointed as a director if you will play an active role in overseeing the company’s business affairs.
There are strict rules around how director IDs can be used. For now, your director ID will not be searchable by the public. The Registrar will consult the community about if and when this should change.
When will Director identification numbers be required?
The Director identification number requirement is set to commence on 22 June 2022 or on such earlier day as may be proclaimed by the Governor-General. Importantly, applications can commence from 01 November 2021.
How to apply for your Director ID
The application is best handled through your MyGovID account. If you don’t have a MyGovID account, Holmans strongly recommend you follow the steps outlined here to obtain one https://www.abrs.gov.au/director-identification-number/apply-director-identification-number.
Other alternatives to apply for the Director ID are provided here https://www.abrs.gov.au/director-identification-number/apply-director-identification-number under the “How to apply if you cannot get a
Your accountant can’t apply for your Directors ID on your behalf.
What happens if a director does not obtain a Director identification number?
It is crucial that directors comply with requirements once they come into effect because there are hefty civil and criminal penalties if you don’t. For example:
- if a director of a CATSI organisation fails to apply for a Director identification number within the applicable time frame, they can face a civil penalty of up to $200,000; and
- if a director of an organisations registered under the Corporations Act fails to apply for a Director identification number within the applicable time frame, they can face a civil penalty of 5,000 penalty units (which is currently $1,050,000) or three times the benefit derived, or detriment avoided because of the contravention (whichever number is higher).
There are also other large civil and criminal penalties associated with actions which undermine the Director identification number regime, such as providing false identification documents. Given these penalties, it is crucial organisations and directors (or prospective directors) stay up to date with the new laws to ensure Director identification numbers are obtained when required.
Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.