In brief - Royal assent has recently been received for a legislative package consisting of five bills including the Commonwealth Registers Bill 2019, Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (Registries Modernisation) Bill 2019 and National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019 (together, the Registries Modernisation Law)
The Registries Modernisation Law will modernise the way that Commonwealth business registers are kept and accessed. It will also introduce a new concept of director identification numbers (DIN) which is aimed at combatting fraudulent phoenix activity.
These changes are expected to be implemented in the first half of 2021.
Modernising business registers
The Commonwealth Registers Act 2019 is a new Act and along with the other Amendment Acts in the legislative package, creates a new centralised Commonwealth business register.
The stated rationale behind modernising and centralising the Commonwealth business registers is to reduce the time that businesses spend complying with regulations and interacting with government so that they can focus on growing their business.
In short, 34 registers that are currently maintained by the Australian Securities and Investments Commission (ASIC) and the Australian Business Register will be consolidated into a single register. The new register will be administered by a single Commonwealth body to be appointed by the Minister.
Some of the more commonly used registers that will be consolidated include the Australian Business Register (i.e. the ABN register), the companies register, the business name register, the register of disqualified company directors and the register of financial services licensees.
The new registrar of the centralised register (the registrar) will be able to make data standards aimed at increasing the efficiency of the registry services. These data standards will be in relation to the collection, maintenance and disclosure of information under the centralised register.
From a practical perspective, this consolidation exercise will be welcomed by businesses. In addition to having to navigate multiple systems, business owners currently have to input the same information into different registers that do not speak to each other. The consolidated system will hopefully make it easier for information to be more current and consistent. It will also make it easier for regulatory authorities such as ASIC to access real-time information in exercising its regulatory functions.
The Commonwealth Registers Act 2019 will also regulate how information in the register may be disclosed. A maximum penalty of two years imprisonment has been introduced for offences relating to the unauthorised disclosure of information in the register. Given the amount of information that will be in this new system and the current sensitivities surrounding data protection, this will be an important safeguard. A person also has the option to make an application to the registrar to prevent the inappropriate disclosure of information that relates to them.
New Director Identification Number (DIN) regime introduced
The second key change under the Registries Modernisation Law is the introduction of DINs. The Registries Modernisation Law will amend the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 to introduce a new DIN requirement.
The government has made it clear that the introduction of DINs is an initiative to deter and track fraudulent phoenix activity. It will also hold directors more accountable for past activities and make it more difficult for directors to use fictitious identities.
In short, a DIN will be required for all directors appointed to a registered body regulated by ASIC or the Office of the Registrar of Indigenous Corporations. Currently, it appears that the DIN requirement will apply to directors and alternate directors (but not de facto or shadow directors).
Subject to limited transitional provisions, directors will need to apply for a DIN prior to being appointed and are prohibited from knowingly applying for multiple DINs. To make it easier for prospective directors, applications for DINs will be allowed for persons who intend to become directors within the next 12 months.
It is important to note that the intention behind the introduction of DINs is not to allow the registrar discretion as to who may become a director. Rather it is more a matter of procedure and the registrar must give a person a DIN if that person is eligible to apply for a DIN and has established their identity to the satisfaction of the registrar. Likewise, the registrar cannot give a person a DIN or cancel a person’s DIN without notifying the person.
Prior to the issue of a DIN, directors will need to undertake a verification process which can include a request for the director's tax file number. Once issued, the DIN will be indefinitely assigned to the director even after they have ceased or resigned from their initial position as director of that company.
There will be transitional arrangements for the implementation of the DIN system. Existing directors will have a prescribed amount of time to apply for a DIN following the date the Registries Modernisation Law commences operation. New directors appointed within the first 12 months of the date of operation will also have an additional 28 days following appointment to apply for a DIN.
These transitional arrangements will allow directors to ease into this new requirement and hopefully minimise breaches occurring. Multinational companies in particular will need to be alert to this new requirement when appointing directors, especially if they are appointed to a number of group companies at a global level. The DIN requirements will also apply to registered foreign companies. Local agents should therefore be aware of these upcoming requirements in order to ensure that their relevant directors are compliant and apply for a DIN.
Contraventions of the DIN requirements may lead to significant criminal and civil penalties.
Breaching the requirement to apply for a DIN prior to appointment will be a strict liability offence.
In summary, we expect the Registries Modernisation Law to be welcomed by the business community at large. Modernising the business registers will improve the accessibility, currency and search ability of these registers. However, compliance and governance teams may need to improve their processes in order to avoid any inadvertent breaches and avoid last minute hold ups in director appointments, given the requirement to hold a DIN.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2021.