A number of bills broadly concerning the registers of information held by the Commonwealth have been referred to the Senate Standing Committee on Economics for review.[1] The Committee is due to report by 26 March 2019.
One – the Commonwealth Registers Bill 2019 – would introduce a director identity number – DIN.
This idea, simple as it may be, was initially proposed by Professor Helen Anderson some years ago and she has been instrumental in pressing for its introduction since then.[2] The title of her 2013 article – an ounce of prevention – indicates her approach, that phoenix misconduct is dealt with more effectively through its prevention rather than pursuit of the misconduct after it has occurred.[3] Professor Anderson has offered many other ideas for dealing with phoenix misconduct, and tax collection, in the same vein.[4]
The simplicity of the DIN – that each company director obtains a unique numerical identifier – belies its importance and impact.
As the Explanatory Memorandum says,
“the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identities. This will assist regulators and external administrators to investigate a director’s involvement in what may be repeated unlawful activity including illegal phoenix activity”.
The EM explains that although the present law has required that directors’ details be lodged with ASIC, it has not required ASIC to verify their identity. This has led to directors using, deliberately or otherwise, inconsistent names, or fictitious names.
Phoenixing
The EM says that the verification aspect of the DIN will improve the integrity of corporate data and help with enforcement action associated with phoenixing.
Simpler tracking of directors
Beyond phoenixing, the EM says that there are other benefits.
“For instance, simpler more effective tracking of directors and their corporate history will reduce time and cost for administrators and liquidators, thereby improving the efficiency of the insolvency process”.
Convenience for directors
But the EM does not mention the positive benefits of a DIN for directors. It will allow them to simply quote their ‘number’ in any dealings with their companies or directorships of new companies, rather than having to extract all their associated details – name, address, date of birth etc.
No doubt a DIN card will eventuate.
The EM points out that the introduction of a DIN was recommended by the Productivity Commission in its September 2015 final report into Business Set-up, Transfer and Closure,[5] which, in reality, only adopted Professor Anderson’s ideas.
[1] Commonwealth Registers Bill 2019, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, the Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, the Corporations (Fees) Amendment (Registries Modernisation) Bill 2019 and the National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019 [Provisions].
[2] An ounce of prevention: Practical ways to hinder phoenix activity, (2013) 25(3) A Insol J 16-18, Helen Anderson.
[3] See “Illegal Phoenix Activity: Will A Phoenix Prohibition Solve The Problem” [2019] WAStuLawRw 3; (2019) 3 Western Australian Student Law Review 28, Tessa Richardson
[4] See for example “Illegal Phoenix Activity: Practical Ways to Improve the Recovery of Tax” [2018] SydLawRw 10; (2018) 40(2) Sydney Law Review 255, Helen Anderson
[5] See recommendation 15.6 of the Productivity Commission’s report.
