The Dept. of Business, Innovation and Skills (BIS) issued a Discussion Paper yesterday: “Transparency & Trust: Enhancing the Transparency of UK Company Ownership and Increasing Trust in Business.”
A worthy topic for discussion you might think. Nothing wrong with a bit of transparency and trust. The former will help the latter apparently, according to Vince Cable, writing in the foreword to the Discussion Paper.
So what does the Secretary of State want to do to achieve this noble goal? He wants to create a new toy; a central registry of beneficial ownership of companies and LLPs. He’s prepared to exclude from his new play thing, the relative handful of companies listed on the Main Market of the London Stock Exchange, as they already have enough disclosure obligations to deal with. Other than those companies, every company and every LLP registered in the UK – about 2,500,000 entities in total, according to the Discussion Paper would be subject to a new disclosure regime.
The desire to list out beneficial ownership might sound straightforward, but is likely to be pretty tricky in practice. For instance, the Discussion Paper recognises that there is not much that can be done to make foreign companies play along with the new system. So if a company records the beneficial ownership of a proportion of its shares as being in the hands of an offshore vehicle, we will presumably be none the wiser whether there is one or a thousand different other layers concealed behind it.
Secondly, BIS’s transparency scheme is geared to establish not just who owns companies, but who controls them. It is suggested therefore that where one or more shareholders, “wield influence” through “dispersed shareholdings or through an agreement to act in concert” that that would also have to be disclosed.
Thirdly, the registry would also hold information on individuals who, “otherwise exercise control over the company, irrespective of whether or how many shares they hold.”
Quite how a company is supposed to know where to even begin to look for much of this information is not clear.
But what is clear is what a massive bureaucratic and administrative monster this has the potential to become. Once again it seems, Vince has anticipated that you might think this too, as he adds, again in the foreword to the Discussion Paper:
“…I remain fully committed to reducing regulation and burdens on business. I am continuing to look at options to reduce administration and compliance costs for business as part of Government’s ambition to create a streamlined, effective and pro growth business environment.”
It is beyond parody.
The Discussion Paper is open for consultation until the autumn. One can only assume that by the time the results of the consultation have been mulled over in Whitewall, that parliament’s nose will be pressing keenly against the window of the next general election and the whole exercise will be quietly kicked into the long grass.