There has been a lot written in the past year on the new Director Identification Number (director ID) requirements. Advisors in the professional services industry are now well versed in the requirements, the transitional deadlines and who needs to apply and by when. However, not much has been written about the implications for new company registrations and what the director ID requirements mean in practical terms, for new company registrations.
As a reminder, first-time directors need to apply for their director ID before they can be appointed as a director of a company. They are legally obliged to apply before the ASIC Form 201 can be lodged to register a new company (regardless of the fact that the director ID number is not technically required for the company registration form or to appoint a director via a Form 484).
Are you asking your clients for their director ID number?
Since April 2022, you many have noticed that company registration providers have incorporated requests for director IDs on their online platforms. If you are incorporating companies on behalf of clients, are you asking for their director ID number in your initial conversations? This serves two purposes: informing directors of their obligation to apply and also prompting them to apply if they haven't already. It is important to note that it is a criminal offence if directors do not apply when required to and there are severe penalties for non-compliance. These penalties are outlined on ASIC’s website here.
As their advisor, you are not looking out for your clients if you are not raising the topic of director ID numbers and also encouraging them to apply.
How to apply?
The steps to apply are well documented on the Australian Business Registry Services (ABRS) platform and directors can be directed to the ABRS to apply either online (preferred approach), by phone or via hard copy application.
What precautions are you taking to avoid unnecessary corrections to directors’ names at a later stage?
If you provide ASIC agent services, you'll know all too well the frustration of directors having multiple versions of their names across their various companies. With the introduction of director IDs, there is an added complication of inconsistencies between ASIC’s records and their official legal name now being created on the ABRS platform via the director ID application. Are these the same? The interim dual reporting is far from perfect. You should at least pause and verify you have a director’s full legal name, as per the name recorded by the ABRS, before registering a company.
Have you considered the complication of foreign director appointments to HOLDCOs in an acquisition?
We recently assisted a client in the sale of their business. The buyer was a foreign company from the United States. Accordingly, the proposed new Australian Holding company (Holdco) would comprise of mostly foreign directors. The proposed US-based foreign directors had no prior directorships in Australia. Accordingly, they each needed to apply for their director ID applications in hard copy paper form before being appointed to the Holdco. This involves original certified copies of identification documents and physically mailing the applications to the ABRS. As we know, this takes time.
For situations like this, here are a few options to consider:
The Holdco is incorporated without the appointment of the foreign directors, and they are appointed to the company at a later stage, once they have applied for their director ID;
The foreign directors apply for an extension of time to apply for their director ID and if approved by the ABRS, the company registration proceeds with their appointments; or
The completion date of the sale is delayed.
Gone are the days when you could incorporate the HoldCo with multiple first-time foreign directors within a day. Even Australian directors are experiencing roadblocks in applying online.
The good news is that their appointments as directors can proceed once they have applied. They don’t need to wait for their director ID number to be issued by the ABRS, before they are appointed.
The other point to note is that intending directors can apply well in advance of their appointment. Hence, if a transaction is anticipated, impending directors should be encouraged to apply in advance.
Are you ready for big change?
The biggest changes to our existing company registration process are yet to come. If you’re not already aware, the Modernising Business Registers team is working hard to design a whole new way of doing things once ASIC’s Companies Registers, the Business Name Register, the Australian Business Register (ABR) all transition to the ABRS platform.
Under the new ABRS platform, we will be able to register a company, apply for a business name, appoint a public officer and apply for tax registrations all in one place directly with the ABRS.
The team at CorpSec Services can assist with director ID applications for foreign directors or corrections to directors’ names across multiple companies. Please contact us at team@corpsecservices.com.au with your enquiries.
