New implications on accountants and advisers – Director Identification Numbers

The recent passing of the Treasury Law Amendment (Registries Modernisation and Other Measures) Act 2019 (Cth) and thereby the introduction of the new system of Directors Identification Numbers (DINs) creates a new hurdle for the creation of companies, and the appointment of new directors.

Introduced to assist with combatting illegal phoenix activity, the system of DINs provides for the creation of a mandatory register of all directors, and upon application provides them a permanent identification number. While this may operate to assist with the tracking of directors through companies and help identify criminal actors, the system may also operate as a handicap on the activity of accountants and other advisers attempting to establish new companies or assisting their clients with the appointment of directors.

Whilst the operation and commencement of the scheme is yet to be set, and no regulatory body has yet been established as the Registrar of the new scheme, new directors will soon be required to apply for a DIN prior to their appointment as a director. As this process requires the verification of the new director’s identity, it is unlikely to be a quick process, and may require a period of delay when otherwise a new appointee would have been able to immediately step forward and commence their directorship.

For accountants and advisers assisting new directors and those who may often register new companies on behalf of clients, this will be a new requirement to comes to grips with, and walk their clients through. As civil and criminal penalties apply to the director’s obligation to apply for a DIN and for the misuse of DINs, accountants and advisers should take care when advising their clients about the new system.

It is currently not known whether accountants are able to apply for a DIN on behalf of a client. If so, that may cause an influx of sensitive and personal identity documents into an accountant’s files. For accountants and advisors, who may come in possession of the proof of identity documents of a client, it is worthwhile to reflect on your data risk, document security and cyber security plans to avoid any theft of key identity documents and other associated risks and liabilities.

Whilst the actual effects of the new system are yet to be seen, and its procedural requirements are largely unknown, we recommend that you monitor the rollout of the scheme for further insight into future requirements and obligations, or risk civil and potentially criminal liability.

Should you have any queries regarding the rollout of the scheme, how to ensure your compliance with your legal requirements, or commercial and business law more widely, Gavin Parsons and Associates can assist you. Please contact us today on (02) 9262 4471.

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Date posted: 2020-08-03