Director ID
LegalCorporateCompliance6/05/2021 12:00:00 AM

Company Law - Director ID Extended Application Period

On 22 April 2021, the government announced 2 instruments to extend the application period in which an individual is required to apply for a Director Identification (ID) Number. These 2 instruments are the:

Broad consultation on the 2 instruments was undertaken for a period of 3 weeks commencing on 29 March 2021. The draft instruments and explanatory statements were published on the Treasury website during this consultation period. Both instruments commenced on 30 April 2021.

The Corporations Instrument is made pursuant to subs 1272E(2) of the Corporations Act 2001 (Cth) (Corporations Act).

The Indigenous Corporations Instrument is made pursuant to subs 308-30(2) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

Both enabling acts permit the Registrar to extend the application periods for Director ID’s.

Background

The introduction of a director ID requirement is one of the government initiatives to promote good corporate conduct, facilitate confidence, and deter and penalise illegal phoenixing, fraudulent corporate activity and business misconduct. Illegal phoenixing occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring its assets to another company. This has an impact on creditors (who fail to receive payments), employees (through lost wages and/or superannuation entitlements) and the general public (through lost revenue to the government).

The director ID will require all company directors to confirm their identity. The director ID will be a unique identifier for each individual who consents to being appointed as a company director. An individual will keep that unique identifier permanently, even if they cease to be a director. Individuals applying for a director ID under the Corporations Act are a separate group to those individuals applying for a director ID under the CATSI Act. If an individual has applied for, or received a director ID under one Act, that individual does not need to apply for a director ID under the other Act. Because an individual will only ever have one director ID, the ID will provide traceability of a director’s relationships across companies, enabling better tracking of directors and preventing the use of fictitious identities. This will assist regulators, such as ASIC, the ATO and external administrators to investigate a director’s involvement in what may be unlawful activity including illegal phoenix activity.

However, the new director ID regime will also offer benefits beyond combatting illegal phoenixing. For example, it is important for shareholders, employees, creditors and consumers to be confident in who the directors of a company are. The director ID regime provides for simpler, more effective tracking of directors and their corporate history. This will reduce time and cost for administrators and liquidators thereby improving the efficiency of the insolvency process. In addition, the regime will improve data integrity and security, and support privacy. For example, it will allow directors to be identified by a number rather than by other more personally identifiable information.

You can read more about director IDs here.

Purpose of the new instruments

The commencement of the director ID legislation (sch 2 of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020), on 4 April 2021, has triggered the requirement for eligible officers (such as company directors) to obtain a director ID. Individuals who were not an eligible officer prior to 4 April 2021 (new eligible officers) are required in the transitional period (the 12 months to 4 April 2022) to apply for a director ID within 28 days of becoming an eligible officer.

The Corporations Instrument extends the application period in which new eligible officers are required to apply for a director ID, under the Corporations Act, to 30 November 2022, if the individual becomes an eligible officer in the period from 4 April 2021 to 31 October 2021 (these dates coincide with a period of system testing for the new director ID system with a select number of directors). So specifically, the Corporations Instrument provides that new directors, appointed during the testing period, have until 30 November 2022 to apply for, and obtain, a director ID.

The Indigenous Corporations Instrument extends the application period in which new eligible officers are required to apply for a director ID, under the CATSI Act, to 30 November 2023, if the individual becomes an eligible officer in the period from 4 April 2021 to 31 October 2022. The reason for this extended timeframe is that the requirement for a director appointed under the CATSI Act to obtain a director ID will not commence until all Corporations Act directors have been fully onboarded with a director ID (this process is expected to take 12 months).

Both the Corporations Act and the CATSI Act allow the Registrar to specify, by legislative instrument, a longer time period to apply for a director ID, for a class of person(s).

After the transitional period, all individuals must have a director ID prior to their appointment as a director, or such later period as may be allowed under the regulations, or by the Registrar.

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Sources: Corporations (Transitional) Director Identification Number Extended Application Period 2021, 29 April 2021, accessed 5 May 2021.

Corporations Instrument, Explanatory Statement, 29 April 2021, accessed 5 May 2021.

Corporations (Aboriginal and Torres Strait Islander) (Transitional) Director Identification Number Extended Application Period 2021, 29 April 2021, accessed 5 May 2021.

Indigenous Corporations Instrument, Explanatory Statement, 29 April 2021, accessed 5 May 2021.

CCH Pinpoint ®, Corporations Act s 1272A Applying for a director identification number, effective 4 April 2021, accessed 5 May 2021.

CCH Pinpoint ®, Corporations Act s 1272C Requirement to have a director identification number, effective 4 April 2021, accessed 5 May 2021.

CCH Pinpoint ®, Director Identification Numbers are finally here, 22 June 2020, accessed 5 May 2021.

CCH Pinpoint ®, Treasury consults on new Director ID regime, 16 March 2021, accessed 5 May 2021.

CCH Pinpoint ®, Legislation for director identification numbers commences, 6 April 2021, accessed 5 May 2021.

CCH Pinpoint ®, Director ID Data Standard, 23 April 2021, accessed 5 May 2021.

CCH Pinpoint ®, Director ID Number Disclosure Framework, 23 April 2021, accessed 5 May 2021.