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Everything you need to know about the new mandatory Director IDs

Reading Time: 4 minutes

Director identification numbers (Director IDs) will be a mandatory requirement for new (first-time) directors from 5 April 2022. The Director IDs have been introduced to help prevent the creation of false Director identities and mitigate adverse cross directorships and illegal phoenixing activity.

All company directors need to meet their legal obligations and apply for their Director IDs before their specific deadlines. 

 

What is a Director ID?

A Director ID is a unique identifier that an individual will keep forever. This 15-digit identifier is given to directors who have verified their identity with the Australian Business Registry Services (ABRS).

Directors will only ever have one Director ID, which will remain the same even if they change companies, change their name, stop being a director or move interstate or overseas.

Directors will need to apply for their own Director ID for identity verification purposes. No one else can apply on their behalf. Every Director will apply for this once and keep it forever.

 

What are Director IDs for?

Director IDs are the first point of focus for the ABRS, a new government registry service established as a result of the Modernising Business Registers (MBR) program.

The ABRS combines 30-plus government registers into a single platform, improving the efficiency of registry service transactions. It makes it easier for businesses to meet their registration obligations and increases the utility and reliability of business information. This is a long-awaited step forward, moving away from outdated systems susceptible to financial misconduct.

 

What will Director IDs do?

Director IDs will be used across certain Commonwealth, state and territory government bodies, courts and tribunals. They will be a key instrument in helping combat fraud, illegal behaviour and the black economy. This will benefit businesses, employees, public revenue, the integrity of the corporate system and the overall Australian economy.

 

Create a fairer business environment

Currently, director information may sometimes be hidden and difficult to obtain. However, shareholders, employees, creditors, consumers, administrators and regulators are entitled to know the names and details of company directors. Director IDs will create a fairer business environment by improving data integrity and confidence in knowing who the directors of a company are.

 

Increase transparency and traceability

Director IDs will improve the traceability of directors’ relationships with companies over time. This will make it easier for external administrators and regulators to track directors of failed companies. The ability to effectively track directors as they go from one company to another reduces the risk of directors engaging in unlawful activity.

 

Detect and deter fraudulent identities

Directors who become bankrupt may sometimes slip through the cracks and continue operating illegally. Monitoring director registrations and appointments over time makes it easier to detect disqualified or fraudulent directors. Director IDs will help to prevent the use of false identities and the appointment of fictitious directors.

 

Identify adverse cross directorships

cross directorship occurs when an individual is found to be the director of multiple companies. When a director has an adverse action registered against another one of their companies, its trading partners may be exposed to the knock-on effects without even being aware of it. Businesses should be able to know if the director they’re working with has other companies or a history of failed businesses. Director IDs will reveal cross directorships, making it easier for businesses to identify potential risks associated with each director they work with.

 

Prevent illegal phoenix activity  

Illegal phoenixing occurs when a company director deliberately shuts down their company to escape their liabilities and transfer their assets to a new company. The failed director sets up a new company with slight changes to evade regulators and debtors. Trade creditors are left unpaid, employees lose their wages and entitlements, other businesses are put at a competitive disadvantage and public revenue is affected due to unpaid taxes and compliance costs. Director IDs will play a crucial role in detecting, deterring and disrupting phoenix activity.

 

Who needs a Director ID? 

If you want to become a director or are already one, you will need a Director ID.

All directors of a company, registered foreign company, registered Australian body or Aboriginal and Torres Strait Islander corporation will need a Director ID.

Sole traders do not require a Director ID.

 

When to apply?

Your application due date depends on the date you become a director.

If you become a director from 5 April 2022 onwards, you must apply for a Director ID before your appointment.

If you were recently appointed as a director between 1 November 2021 and 4 April 2022, you must apply for a Director ID within 28 days of appointment.

If you became a director on or before 31 October 2021, you must apply for a Director ID by 30 November 2022.

 

What happens if a director doesn’t apply for a Director ID?

It is a criminal offence if directors do not apply on time. There are civil and criminal penalties for non-compliance with these new requirements.

ASIC will take enforcement action according to these four new Director ID offences under the Corporations Act 2001:

  • Failure to have a Director ID when required to do so
  • Failure to apply for a Director ID when directed by the Registrar
  • Applying for multiple Director IDs
  • Misrepresenting Director ID

 

How to apply?

Directors can apply for their own Director IDs online using the myGovID app. For step-by-step instructions, visit this page. It is a free and quick one-time procedure.

CreditorWatch is constantly contributing to the fight against dodgy Director activity and illegal phoenixing. To understand exactly who you’re working with, check out

If you’d like to learn more about protecting your business from fraudulent activity, get in touch with us today.