Australian company directors will be required to sign up to a new identification scheme, designed to curb illegal phoenixing activity under new laws unveiled by the federal government.
Draft legislation has been released by treasury, which incorporate director identification numbers, while simplifying the business registration processes.
In 2015, the Productivity Commission estimated illegal phoenixing activity, where a director transfers assets to a new business and then liquidates the existing company, costs Australia between $1.8 billion and $3.2 billion each year. While it’s recognised that the vast majority of Australia’s 2.5 million directors operate their companies in an ethical manner, fraudulent phoenix activity by a small number of people, causes enormous pain to employees, creditors and the economy generally.
Currently, false information can be supplied to ASIC, about the directors of the company, which makes it difficult or sometimes impossible for regulators to track the people involved and bring about a prosecution.
Another unfortunate aspect of the current position, is that the current registers don’t talk to each other, so a new business registry regime will incorporate the two existing company databases.
Although the legislation is not expected to encounter political opposition, there is growing concerns over the privacy and security of directors, who currently have their address, date and place of birth, publicly available on business registers. It has been alleged that this level of information is only useful for people with criminal intent. Certainly, other jurisdictions have examined whether the residential address, date and place of birth should be on the public record,
The identification measures have been designed to assist regulators detect, deter and disrupt phoenixing activity by tracking directors through a database of unique numbers.
Under the proposed changes, new company directors registered under the Corporations, will be required to apply for an identification number within 28 days of becoming a director.
Existing directors will have 15 months to apply and there will be civil and criminal penalties for directors who fail to apply for identification numbers.
But some people believe that this new legislation doesn’t go far enough and are calling for an educational requirement of the corporate duties and responsibilities as a prerequisite to registration and as far as a bond to cover negligence and unpaid debts.
Currently this legislation is only in draft, but it will be interesting to follow its progress.Close