Modernising business registers and Director Identification Number
It has been a busy month for the Policy and Advocacy team responding to the package of bills modernising Commonwealth registers and introducing a Director Identification Number (DIN). As reported in the March edition of Acting for You, the bills were introduced to the House of Representatives and referred to the Senate Economics Legislation Committee for inquiry and report by 26 March 2019.
The bills create a new Commonwealth business registry regime and introduce a requirement for directors to hold a DIN.
The introduction of the DIN and the modernising business registers project represents a major change to both the way that company details are available to users, and how they interact with the registry. Our view is that the DIN regime should be extended to include company secretaries. Failure to include company secretaries in the DIN regime means there will be a ‘missing piece of the puzzle’ when it comes to company registers. A company director will be identified by a DIN, which evidences that their identity has been verified. The company secretary of the same company however will not have an identity number or be able to show that their identity has been verified. This will be confusing for those searching company records for officeholders’ details and will raise questions amongst members of the community about why one set of officeholders has a DIN while the other set does not.
In our submission, we repeated our concerns about the availability of personal identifying information of officeholders being publicly available and recommended that the home address, place and date of birth of officeholders should be removed from the public part of the register.
Governance Institute is a member of the DIN co-design reference group and will continue to engage closely with the government on the practical aspects of the implementation of the DIN.
The bills require a new director to have applied for a DIN before their appointment as a director. There is a 12 month transition period in which new directors will have a 28 day period after their appointment in which to apply.
We have recommended that the government reconsider this timeframe and urged it to extend the transition period beyond 12 months. The 12 month transition period will pass quickly and, if not extended, require new directors to have applied for a DIN before their appointment. This is a significant change to current practice and imposes obligations on directors which have serious consequences. We consider more time will be required to educate members of the public on the requirement to apply for a DIN before they can be appointed as a director.
The Senate Committee noted our concerns, however recommended that the bills be passed in their current form, subject to the operation of the DIN being reviewed after two years after its introduction to ascertain its effectiveness.
Governance Institute is a member of the DIN co-design reference group and will continue to engage closely with the government on the practical aspects of the implementation of the DIN.
We will continue to keep members updated on these projects.
Anti-phoenixing reforms
As advised in the March edition of Acting for You, the government has introduced the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 into Parliament and it has been referred to the Senate Economics Legislation Committee for inquiry and report by 26 March 2019.
The reform is aimed at preventing directors from backdating resignations to avoid liability for offending conduct, such as insolvent trading or transferring company assets to a phoenix company. Under the proposed law, if the resignation of a director is reported to ASIC more than 28 days after the purported resignation, the resignation takes effect from the day it is reported to ASIC.
We consider that the introduction of a DIN will go a long way towards solving the issue of ‘straw’ directors. In order to hold a position as a company director, a person will need to undertake an identity verification check. This should eliminate the appointment of deceased or fictitious persons except in the most egregious cases of identity fraud.
We argued in our submission that while Governance Institute supports provisions which negate the efforts of directors seeking to undertake phoenix activity, as currently drafted, notices of resignation of directors that are lodged outside the 28 day statutory period, due to an administrative or human error and with no intention of facilitating phoenixing activity, will be captured by the new provisions. This may give rise to unintended consequences. Our submission included examples of situations where, under the proposed provisions human errors which have no malicious intent, will result in considerable administrative and legal consequences.
The Committee made specific reference to our concerns, however recommended that the bill be passed.
We will continue to keep members updated on the progress of this bill.
ASX Listing Rules
ASX has recently concluded a consultation on proposed measure to simplify, clarify and enhance the integrity and efficiency of the ASX Listing Rules.
Governance Institute participated in that consultation and lodged a detailed submission.
We support ASX’s proposal to simplify and enhance the integrity and efficiency of the Listing Rules.
While the overall impact of the proposed changes is not major, the volume of changes is significant and will require entities to review their processes to ensure compliance with these new requirements. We have recommended to ASX that the implementation date of the new changes be delayed by 6 months to 1 January 2020.
One of the issues which arose during the consultation was whether a special resolution should be required for a voluntary de-listing. We support imposing a requirement for a special resolution on a voluntary de-listing. We consider that allowing ASX discretion on whether the resolution will be an ordinary or special resolution will result in too much uncertainty. Where ASX has concerns, it can use its powers to impose a voting exclusion.