What you need to know about the new Director IDs

All Directors will be required to register for a unique identification number that they will keep for life.

Why?

ASIC currently does not verify the identity of Directors and any name could be registered as a Director. Under the new regime, all Directors will need to verify their ID and will be supplied a number permanently. Even if they cease to be a Director, you will keep that number for any future endeavours. The expected result is to be able to trace director’s relationships across companies, especially those which fail and prevent fictitious identities.

This is all in an effort to prevent illegal phoenix activities, which is when Directors transfer assets from one company to another and leaving debts and creditors in the old company, effectively sweeping all the problems aside and continue trading with a new company. The most affected includes subcontractors, employees, and the ATO, these are left out of pocket as the company no longer has any assets.

Who will need one?

Every eligible officer, who includes:

• Appointed Directors
• Alternate Directors
• Acting Directors (even if the name of the position is not officially a Director)
• Any other officer registered

Note that the definition includes what is commonly known as shadow Directors, these are not officially a Director, but those who act as one through influence and control. Essentially anyone that is seen to be in control and/or making decisions.

How to apply and when?

You will be able to apply for one through your MyGov account.

Existing directors will have until 30 November 2022 to apply and obtain a DIN. For the first year of the program, new directors will have 28 days to apply for a DIN from the time of their appointment. From the first year onwards, you will need to have a DIN prior to being appointed as a director.

What you need to know

(Especially if you are not in control of a company where you are a Director.)

It is important that anyone agreeing to be a director understands the implications. Being a director is not just a title; it is a responsibility. At a financial level, directors are responsible for ensuring that the company does not trade while insolvent. The by-product of this is that the directors may be held personally liable for the debt incurred. Including PAYG GST and Superannuation.

Failing to perform your duties as a director is a criminal offence with fines of up to $200,000 and five years in prison.

Ignorance is not a legal defence. Do not sign anything unless you understand the consequences.

If you are unsure about what you need to do next, contact Link Advisors today.