Key points

• Directors must apply for a director identification number (DIN) before their appointment
• Upcoming changes to management of Australian companies’ registers are on the horizon (we just don’t know when!)
• Delays in foreign directors’ applying for their DIN may lead to many months before obtaining their DIN and being able to be appointed as a director
• Companies need to ready themselves for prompt appointment of directors upon the foreign directors obtaining their DINs

Obstacles for foreign companies seeking to appoint directors to their Australian target or subsidiary: What you need to know in advance

Any foreign entity seeking to appoint a foreign director to its Australian subsidiary needs to carefully plan ahead if the timing of the appointment is crucial to the management and operations of the subsidiary.

Under the Corporations Act 2001 (Cth) (Act), directors must apply for a DIN before their appointment.  While there is nothing under the Act to confirm what constitutes having “applied”, Australian Business Registry Services (ABRS) has confirmed that for a director to have “applied”, the director needs to have received an email from ABRS confirming receipt of the director’s DIN application.  In other words, the director may not be appointed and may not carry out director duties before such time.

Upcoming changes to management of Australian companies’ registers

Part of the ABRS’ Modernising Business Registers program of work includes moving existing registers and search services from the Australian Securities and Investments Commission (ASIC) to ABRS, and from that time it is anticipated that DINs will need to be linked to companies’ registers.  

When that happens, and ABRS finally has oversight of ASIC registers, companies will likely need to provide:

a) the DINs of their initial directors at the time of incorporation; and 
b) DINs when lodging a notice of appointment of a new director.  

Possible consequences of not planning director appointments well in advance

Currently ABRS is experiencing a two-month backlog in processing paper applications (the majority of them being for foreign director applications).  If this backlog continues, coupled with a potential requirement to provide a DIN at the time of lodging a notice of appointment of a new foreign director with ASIC:

a) companies may find foreign directors-to-be have “applied” for their DIN but have yet to receive the actual DIN;   
b) the company will have to wait until the director in question has actually informed the company of their DIN before lodging a notice of appointment and being able to generate an updated extract of the company’s register; and
c) the company may face penalty fees for late notification to ASIC of the director appointment (as the company must notify ASIC within 28 days of the appointment of a director).

Key takeaways

Foreign entities and their Australian subsidiaries need to ensure foreign individuals to be appointed directors of the Australia subsidiary:

a) are informed very early on of the subsidiary’s intention to appoint them as directors and of the Australian director appointment/DIN requirements (which involves obtaining certified copies of ID documents);
b) are proactive and contact ABRS in relation to their DIN applications (and are aware that if there is any discrepancy between their application and what is actually recorded on their ID documents, there may be delays in processing the applicant’s DIN application (which will in turn result in further delays in their appointment as directors and ability to carry out any director duties));
c) documentation such as consents to act and resolutions to appoint directors are at least in draft form ready to finalise, circulate and obtain the required signatures as soon as the directors-to-be obtain their DINs.

If you require any advice in relation to DIN requirements, Australian Foreign Investment Review Board applications or M&A transactions, please do not hesitate to reach out to our Dentons corporate team.