Directors of companies in Australia will need to obtain unique identification number and would be required to provide identification under a new plan put forward by the Labor Party to combat illegal phoenix activity.

Unveiling its plan, Labour said it will crack down on company directors who partake in the illegal practice of pheonixing, Labor says it will require all new and existing directors to obtain a Director Identification Number with a 100-point identification check.

Though not giving much detail, Labor also said it would:

Phoenix activity occurs when the directors of a struggling business transfer its assets to a new company, which is generally owned by the same people.

By leaving debts owing to employees, suppliers, subcontractors, creditors and revenue authorities stuck in the old company (which is generally placed into liquidation) with little or no money to pay them, this process enables them to avoid paying their obligations in terms of wages and entitlements, subcontractor and trade contractor payments and taxes.

A critical recommendation from a key study into phoenix activity by researchers from Melbourne and Monash University, Labor said the Director Identification Number was a critical part of clamping down on phoenix activity.

“The unique Director Identification Number is integral for small businesses, liquidators and enforcement agencies to access information on directors including accurate information about director histories,” Labor said.

“At present, the registration of an Australian company simply requires the name, address, and date and place of birth of each proposed officeholder. This makes it easier for fraudulent directors to escape their obligations.”

However, there is little word from Labor about how it would respond to the reports other 25 recommendations in the aforementioned Melbourne/Monash report.

Under one recommendation, anyone who has been an officer of five corporations which have either been considered under the Corporations Act to have failed or been deregistered by ASIC within a ten-year period would automatically be subject to restriction for a further five years.

Whilst under restriction, they would be limited to being a director of no more than five companies at any given time and both they and the companies on whose board they sit would be subject to increased reporting requirements – with directors who breached these rules being subject to five-year imprisonment terms.