Australia’s corporate watchdog has launched first-of-its-kind legal action against an unnamed company director for allegedly failing to sign up to the federal government’s compulsory director ID program.
The director, whose identity has been withheld by a Sydney court, is facing fines of up to $13,320 for non-compliance with the mandatory scheme that was introduced in December 2022.
Designed to crack down on illegal phoenix activity worth around $5 billion to the economy each year, the life-long ID scheme provides directors with a unique 15-digit identifier, requiring them to verify their identity with Australian Business Registry Services.
Phoenixing occurs when a new company is established to continue the business of a company that has been liquidated to avoid paying debts, creditors and employee entitlements.
Directors can apply for a director ID using the Tax Office’s myGovID, which forms the basis of the digital identity system that the federal government is in the process of legislating, or other means.
Despite applications opening in November 2021, around 700,000 directors were yet to sign up to the scheme when it became mandatory in November 2022, risking civil penalties of up to $1.38 million.
By September 2023, when Australia Securities and Investment Commission had begun investigating the non-compliance of directors referred to it by ABRS, this figure had fallen to 300,000.
At the end of last year, as many as 200,000 directors were still yet to sign up for the scheme, despite multiple attempts by ABRS urging directors to sign up.
ASIC – which is responsible for enforcing director ID offences – also stepped up its compliance duties in late 2023, telling directors of their need to apply following a referral from ABRS.
While not needing to launch prosecutions by the end of last year, ASIC on Monday said it had now begun processing a director for “failing to comply with the obligations to have a [director ID]”.
An unnamed director appeared in Sydney’s Downing Centre Local Court last Tuesday. A non-publication order was granted prohibiting disclosure of the defendant’s identity until April 16.
The director is facing a maximum penalty of $13,320 for the offence, which falls under section 1272C(1) of the Corporations Act.
Under the Act, penalties can include fines up to $1.38 million or a year imprisonment for misrepresenting or having multiple IDs.
The director ID was the first tranche of federal government’s modernising business registers program, which was scrapped in August in a bid to claw back $12 million-a-month in spending.
An independent review had found the program would cost up to $2.2 billion to complete – five times what had been budgeted by the previous government.
