I promised to say what I thought should be in small company accounts. I will, over time. One thing was suggested by an article in the Washington Times (of all papers) last week. It reported:
Officials in all 50 states will incorporate nearly 2 million companies this year without identifying the owners - a fact a Senate subcommittee fears could help money launderers, tax evaders or terrorist financiers.
"Although the vast majority of companies formed in the U.S. serve legitimate commercial purposes, they are attractive vehicles for those seeking to launder money, evade taxes or finance terrorism," said Sen. Norm Coleman, Minnesota Republican and chairman of the Senate Homeland Security and Governmental Affairs permanent subcommittee on investigations.
"Without company-ownership information, it is often difficult, and at times impossible, for U.S. law enforcement to identify and prosecute the criminals behind U.S. shell companies that are engaged in illicit activities," Mr. Coleman said.
So let's start with the most basic of information that should be disclosed in a set of small company accounts. There should be listed:
- The company name
- The company number
- The state of incorporation
- The registered address of the corporation
- The addresses from which it trades or has traded in the year (yes, all of them - after all, this doubles as advertising for legitimate concerns)
- The names of the directors of the company who have served in the year
- The names of all company secretaries in the year (if one is required)
- The names and addresses of all shareholders in the year
- If any shareholder, director or company secretary acts as a nominee this must be disclosed and the identity of the person for whom they act must be disclosed
- The names, company numbers and states of incorporation of any entities that control the company directly or indirectly, with details given as to how that control is established and who the beneficial owners of those companies are if that information is not available on public record in the same state as that in which the reporting company is located, free of charge
- Likewise details of the trustees and beneficiaries of any trusts that directly or indirectly contributes to control of the company.
For a legitimate operation this information should be a matter of no consequence. No one can argue that its disclosure increases the burden on business. In the UK this information would eliminate the need for a separate annual return to Companies House, so cutting the burden of administration.
The only objection to this disclosure can come from those pursuing an illegitimate activity, whether related to tax or trading.
In that case this disclosure seems the most basic first requirement for data to be included in small company accounts, the world over. And it would meet the needs of those enforcing the law the world over. The benefits clearly outweigh the costs. So why isn't it happening?
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Why in particular the addresses of shareholders?
And in general, small companies however defined would have to disclose information that non-small companies do not have to disclose. Is this right or realistic?
Richard
First of all, this data would, of course, be required of all companies. My assumption in writing is that all I ask for is a baseline. Medium and large companies might be asked for more.
Second, the addresses of shareholders are needed for a particular reason. It is real people who own companies. It is real people who need to be held accountable for them. They can only be identified by their names when they are associated with a place. Addresses are vital.
Richard
The new Companies Act is about to remove the requirement to have the addresses of directors publicly available – mainly because of problems associated with extremists targeting directors of certain companies. I assume that a ‘service address’ would be fine by you.
Secondly, are you seriously suggesting that the accounts of a listed company will include the names and addresses of all the shareholders at any time in the year?
Richard
No service addresses would not do me. I want real ones. Of course security applications can be made for exemption – but the number of cases will be 0.01% of the total. I don’t believe in throwing babies out with the bathwater.
As for all shareholders in the year. Tell me why not? The data is available. And wouldn’t it be good to see who has been churning shares for the supposed benefit of their clients but actually to generate fees?
Richard
[…] In my last blog on this issue I asked for readily available and therefore non-burdensome data on ownership and management to be included in small company accounts. There was an implicit assumption in that suggestion, which is that the accounts of all small entities that enjoy limited liability should be made available, on line, free of charge for inspection by anyone who wants to see them. I therefore make this the next explicit recommendation I have to make on this issue. […]
Afternoon –
I can’t help but agree with the notion to make public all sets of accounts even those who have the privilege of using limited liability. For one illegalities could become more exposed and secondly it could assist small business owners such as myself with my current dilemma.
Not wanting to use the unnecessary expense of an accountant to prepare my accounts – I have found it rather difficult to come across a template for a (small company – really small ie applies to all small company limits) that indicates what minimum information is required and in particular the Companies Act notes on the balance sheet etc.
(Minimum requirements for tax return not necessarily Companies house)
Short of trawling through blog after blog is there anybody who can assist with a quick reference?
Any assistance would be greatly appreciated.
Rgds
RM
Richard
There are things like this:
http://www.amazon.co.uk/Practitioners-Audit-Service-Disclosure-Checklist/dp/1853556181
Or you could buy software. Try VT Accounts http://www.vtsoftware.co.uk/. There are templates on there and many in the profession think they’re good.
Richard