A new series of tax haven disclosures by media organisations began yesterday, the Tax Justice Network summarises it like this:
OpenLux is a join investigation into Luxembourg's beneficial ownership register conducted by the French daily Le Monde, Süddeutsche Zeitung, the journalist network Organized Crime and Corruption Reporting Project (OCCRP), the Belgian newspaper Le Soir, the Luxembourg weekly Woxx and the American media group McClatchy, which publishes the Miami Herald, and others that also took part.
As they add:
What makes OpenLux so striking is that it‘s not a leak from a shady service provider, but a deep dive into public government data that had been made unwieldy to connect dots with. Luxembourg should perhaps be commended for providing better public access to its beneficial ownership register than most other countries, but the fact remains that today's revelations only came to light once journalists laboriously analysed the data and linked it up with other public records. This speaks volumes about the severe shortcomings of not just Luxembourg but the many governments, including across the EU, that have been reluctant both to publish and to employ beneficial ownership data despite its evident power in the fight against tax abuse, money laundering and financial crime.
They also note:
OpenLux makes two things clear. First, for beneficial ownership transparency to be useful at all, it must be made publicly available so that society can hold wrongdoers and government to account. Second, financial secrecy remains a central pillar of Luxembourg's economy. Financial secrecy keeps tax abuse feasible, drug cartels bankable and human trafficking profitable. Luxembourg must put an end to its financial secrecy and it can start by closing loopholes in beneficial ownership registration, financial disclosure and tax ruling disclosures, and by closing down companies of investors that fail to comply with transparency requirements.
I have to confess none of this is terribly unexpected. I can offer three reasons.
The first is UK experience. Since equivalent information was required in the UK and the company annual return filed with the Registrar of Companies was replaced by the supine annual confirmation statement the quality of the information provided here has gone down, considerably.
At one time it was at least possible to determine the legal ownership of companies in the UK. Now that is very hard to do, because complete shareholding listings need no longer be filed on public record for UK companies. That is in itself a massively retrograde step. And once it is possible to miss out whole chunks of disclosure, legally, then the possibility of abuse skyrockets simply because the basic control mechanism that requiring 100% disclosure imposes has gone. As a result the beneficial ownership regime in the UK has taken us backwards and significantly increased the probability that UK companies are used for illicit activity.
Second, if that is the case in the UK, which does at least have a central registry of company data, then it was much more likely to be the case in a place like Luxembourg which has always traded off being a secrecy jurisdiction.
Third, I am afraid that this was predictable, and I always felt it likely. I am going to be critical of some tax justice campaigners here (and there are exceptions, the Fair Tax Mark being a notable one). Because many now have little experience of tax, accounting or regulation, however well-meaning many are (and they are, without a doubt) they do not understand either basic control mechanisms or how they can be abused. So, for example, they tolerated thresholds below which disclosure was not required when campaigning for beneficial ownership disclosure when none should have been accepted.
What is more, they argued for beneficial ownership disclosure but have never made having full accounts on public record a demand of at least equal importance. The result is that all too often beneficial ownership of a company, the scale of whose activities are unknown, is the best possible (and even then, quite possibly unlikely) outcome of their demands, which is why I have never shown much support for their campaigns on this issue.
We need five things from company registries:
- The names of all registered companies;
- Information on where these companies are, and not just a legal address;
- The names of all the beneficial owners of these companies and proven identities of the material owners (I suggest anyone owning more than 2%);
- The names of directors;
- The accounts of the company, in full, as supplied to shareholders or, if there are none, the directors.
This has not been the demand. It would help if it was from now on.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“the company annual return filed with the Registrar of Companies was replaced by the supine annual confirmation statement the quality of the information provided here has gone down, considerably. ”
Out of curiosity, what information was required to be submitted to Companies House in an Annual Return that is no longer required to be submitted in a Confirmation Statement?
A full list of shareholders
And a full list of directors, and a statement of the share capital in issue.
Random example: for Arcadia Group Limited:
* 1 June 2020 confirmation statement, three pages of nothing – https://bit.ly/3jCeGUn
* last annual return to 1 June 2016, eight much more informative pages – https://bit.ly/3aOhCcD
Admittedly in that case there is only one shareholder, and all the directors give the company’s office as the address for service, but at least they are all be listed together in one place, updated annually.
The company books are always the primary record, but who has the time to make appointments and visit the registered offices?
Precisely
Thank you
My whole point
Thank you for addressing all the trolls on here
It’s odd you think that. s853F Companies Act 2006 specifically states that a return of shareholders is required in a Confirmation Statement.
So why is none requested?
https://www.legislation.gov.uk/ukpga/2006/46/section/853F
Subsection 4 says no information is required if it hasn’t changed since last time it was updated. Which means that, in practice, rather than looking at one convenient document, you have to track back four or five years to see whether any updates were made. In most cases, the only comprehensive statement is the last annual return before they were abolished.
Precisely
So, as I say, not readily searchable in an online format
So defeating the object of the exercise
“So why is none requested?”
They are requested. And they are supplied. Picking a company at random, Menas Associates Limited, the Confirmation Statement dated 22 August lists, among others, John Brehony holding 70,445 shares, Philip Griffin holding 70,444 shares and so on. It shows that 99,262 shares were transferred by Charles Gordon on 31 August 2017. It’s there for all who wish to look.
What we can tell from subsequent Confirmation Statements which were filed as ‘no updates’ is that the shareholdings have not changed since. It is all there on the public record as it is for millions of other companies.
You are supposed to be an accountant. Surely you have completed at least one Confirmation Statement since they were introduced?
I am an FCA
I have completed many such statement
Now try to do a systematic search ver the file to find shareholders – it is dead data (not electronically extracted) and requiring reference back to a now out of data document to make the point
In other words – not searchable in any useful way exactly as I said
And, without request for update – which is the f9rm in which the confirmation statement is completed – totally possible to overlook or just ignore
The absence of positive statements is the issue
I look forward to your apology.
“I have completed many such statement
Now try to do a systematic search ver the file to find shareholders”
Name a company with shareholders that you have filed Confirmation Statements for. I will supply you with a list of its shareholders and how many shares they own.
You may be incapable of performing such a straight-forward search, I am not.
With respect, as is glaringly apparent, that is not the point I or this leak enquiry is making
But then you know that, and are trolling
And I have no time for trolls
I’m afraid that neither you nor ‘Andrew’ seem to understand how Confirmation Statements work.
They supply details of changes. If nothing has changed since the previous Confirmation Statement that is what the Confirmation Statement will say.
Andrew is being disingenuous in comparing the Annual Return of 1 June 2016 with the Confirmation Statement of 1 June 2020. All changes that would have been reported in an Annual Return have been reported in Confirmation Statements dated 1 June 2017, 4 April 2018, 1 June 2018 and 1 June 2019. All information that would have been available in ‘old’ Annual Returns has been reported in Confirmation Statements. What we learn from the Confirmation Statement of 1 June 2020 is that there were no changes to the information which needed to be reported since 1 June 2019.
We know exactly how they work
I happen to know Andrew is very well professionally qualified, as I am
And so what we know is that it is now very hard t secu8re data and its reliability is bound to be declining as a consequence
What I know is that you are here to deny a truth
I don’t appreciate being described as disingenuous, “Charles”. If you think I am lying or insincere or trying to mislead why don’t you just say so. I have given you an example (and I openly admit not an ideal one but the first that came to mind) and my honest opinion. Why would I lie?
I look up company details on a frequent basis as part of my work. In my experience, it has become less convenient and more time consuming to find the information I need. Others seem to share that view. It is not enough to say the information can be worked out like a jigsaw puzzle by pulling together snippets from half a dozen places. What is the problem in asking companies to provide it all together in one convenient place each year?
I am genuinely surprised to see such a vociferous defence of the confirmation statement. No one I speak to in practice finds them useful.
If we actually wanted to improve things, a modern alternative might be company books held centrally and electronically by Companies House, where the primary records could be updated online without delay and made freely available to the public.
You are right Andrew, of course, in everything you say
And that no one finds these things useful
Welcome to the world of being trolled
I am about to post another blog on this
“At one time it was at least possible to determine the legal ownership of companies in the UK. Now that is very hard to do, because complete shareholding listings need no longer be filed on public record for UK companies.”
Under section 116 of the Companies Act 2006, any person may ask a company to inspect its register of members. A company can appeal to a court on the grounds that there is no proper purpose to the request but the courts have specifically stated that investigative journalism into the interests or ownership of shares would be a proper purpose.
I appreciate that you may not have caught up with changes in company law so thought I would bring this to your attention.
We are discussing public registries of companies, not mechanisms designed for a century ago with those with time on their hands
Your facetiousness merely discloses your won inability to follow an argument
Since the registry is available to the public, how is it not a public registry? If you are interested in the shareholders of a company, you can access a list of them. All you have to do is ask.
It is not a public registry – because it is not at companies house
If you don’t get that this is what we are discussing please don’t waste my time
What a rude response from you. Jenny Drayford appears to be trying to be helpful.
I’m not quite sure what your comment about having time on your hands means. If you are suspicious, surely you would be prepared to spend some time doing a little research? If you can’t be bothered it obviously doesn’t matter too much to you. What are you after? A list of shareholders posted to you by Companies House of all shareholder registries of all companies with fraudsters highlighted?
Not rude at all – the discussion was about public registries and you and she, I presume deliberately, miss the point
With respect, you may be able to access the shareholder information by making an appointment and then turning up at the registered office (very slowly and inconveniently, one company at a time, as if we still lived in the age of the office clerk running a manuscript ledger with the quill pen) although good luck doing that during the current pandemic.
In return for limited liability, this sort of very basic information should be provided as a matter of course and freely available, which it is not it can only be found “in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying ‘Beware of the Leopard’.”
Precisely
But I was also referring to public registries – a term well known in the EU, and referring to central on lone registries of data and as discussion here shows, totally unsearchable in any systemic way in the Uk, and so not meeting expectation
Lists of shareholders ARE supplied as part of a Confirmation Statement. I don’t know why you think they aren’t. I can only assume you have not yourself completed one in which case I suggest that you speak to someone who has.
Let us select one company whose products I have seen in Tesco (Nix&Kix Limited, company number 09270784 ) and let us look at the last Confirmation Statement filed at Companies House for 9th March 2020. It is 9 pages long and lists 63 shareholders by name. Go and see for yourself if you do not believe me.
It has
Now tell me how that data compares to an old annual return and how useful it is?
And then tell me how this was a step forward
You still fail to address the issues I make – all of you
“Now tell me how that data compares to an old annual return and how useful it is?”
Oh, that’s easy. Under the new rules, anyone holding more than 25% of voting power directly in a company must be separately disclosed. Anyone owning more than 25% of shares or voting power indirectly must be disclosed. Anyone who has the right to appoint or remove a majority of the Board of directors must be disclosed. Anyone able to otherwise exercise significant influence or control must be disclosed.
None of that was required under the old ‘Annual Return’ rules.
Basically ALL the information which had to be disclosed in an Annual Return needs to be notified in a Confirmation Statement. One difference is that only CHANGES since the last CS need be notified. You seem to imply that this would make research more difficult. Really? Having to look at 4 or 5 documents instead of one? That would bring your research to a grinding halt? Are you saying the previously you would ONLY have looked at the most recent Annual Statement? That you wouldn’t have been curious about changes in prior years? Can’t have been very thorough research you undertook. The other difference is that shareholder addresses are not published (although founder shareholders are as are PSCs). That they are not is due to data protection rules, not some sinister conspiracy. Besides, as explained, shareholder addresses are not ‘secret’. They are available to anyone with good cause and the gumption to go look.
It seems that your complaint is that the information is not ‘convenient’ enough for you. Perhaps any reports you prepare in future should carry a warning “only contains information it was easy for me to find”.
I am most amused by your comment and its identical twin. See my blog this morning.
The lack of adequate disclosure simply tells us there is poor quality democracy in action despite all the phoney lip service pretence by politicians that democracy is in robust health!
I presume you are aware that if companies openly published shareholder addresses they would be in breach of The General Data Protection Regulation 2016/679 which is a regulation in EU law on data protection and privacy in the European Union and the European Economic Area. The same would apply to Companies House if also published addresses. As it is, they do publish a full list of shareholders’ names and it is a company law requirement that they be supplied in the annual Confirmation Statement.
It was the passing of this EU law that resulted in Companies House changing policy on the publication of shareholders’ addresses. previously they had done so.
You can’t really blame Companies House for EU law.
It is not a confirmation statement requirement
With respect, you are wrong
Richard you have been made to look like a mug.. I would close the thread before you embarrass yourself even further.
Thank you Steve Jones in another guise
You can’t even troll well
“Now tell me how that data compares to an old annual return and how useful it is?”
Oh, that’s easy. Under the new rules, anyone holding more than 25% of voting power directly in a company must be separately disclosed. Anyone owning more than 25% of shares or voting power indirectly must be disclosed. Anyone who has the right to appoint or remove a majority of the Board of directors must be disclosed. Anyone able to otherwise exercise significant influence or control must be disclosed.
None of that was required under the old ‘Annual Return’ rules.
Basically ALL the information which had to be disclosed in an Annual Return needs to be notified under the new rules except minority shareholder addresses. One difference is that only CHANGES since the last CS need be notified. You seem to imply that this would make research more difficult. Really? Having to look at 4 or 5 documents instead of one? That would bring your research to a grinding halt? Are you saying the previously you would ONLY have looked at the most recent Annual Statement? That you wouldn’t have been curious about changes in prior years? Can’t have been very thorough research you undertook. The other difference is that shareholder addresses are not published (although founder shareholders are as are PSCs). That they are not is due to data protection rules, not some sinister conspiracy. Besides, as explained, shareholder addresses are not ‘secret’. They are available to anyone with good cause and the gumption to go look.
It seems that your complaint is that the information is not ‘convenient’ enough for you. Perhaps any reports you prepare in future should carry a warning “only contains information it was easy for me to find”.
I am most amused by your comment and its identical twin. See my blog this morning.
[…] I was amused to note two, I think identical, comments made on the blog this morning in response to my comments made yesterday on the need for improved annual reporting by UK based comp…. […]