By George Porter, Knowledge Manager
Retrieving company records is an important part of modern due diligence: whether it’s conducted online or in person, reviewing company records is a crucial part of establishing the background and solvency of a company. It’s also the only truly effective way of confirming the ownership or shareholding allocation of a company, and if you’re planning on establishing a business relationship you need to know exactly who you’re dealing with! However, standards differ greatly between jurisdictions and unfortunately this can mean some registries are a lot less useful than others. So who are the good, the bad and the ugly of the company records registry world?
There’s been significant pressure placed on governments in recent years to open up company registers, making them more accessible, transparent and including more information related to who actually owns the company. Campaign groups such as Transparency International have been instrumental to this. The need to enforce sanctions against many Russian owned companies has also increased recognition within the UK government and others of the issues associated with shell companies.
As a result there are more registers around the world moving toward the model of a free, online and publicly accessible database of all company information, with company records only a few clicks away. Currently the best examples of this are the UK’s Companies House and those around the world that follow a similar model of online transparency, such as Moldova.
Companies House itself, while receiving criticism in recent years for the quality of its data, nonetheless is a great example of data transparency. The Companies House database is freely searchable without registration or login. The open data licence allows firms and individuals to plug into its API after completing a simple application, and information that is often concealed or made hard to access on other registers, like company accounts or director information is easy to locate and free to download. Recent improvements have also increased the availability of data relating to the ultimate beneficial ownership of a firm, a prized piece of information for anti-corruption investigators and due diligence analysts.
While there are still issues with the model overall, it’s a mark of distinction in itself that the criticism of Companies House is the opposite of that usually levelled at company registries: an abundance of data of varying quality rather than extremely limited access to vital information. Recent announcements from Companies House seem promising however, as they’ll now be running checks on those seeking to register new firms and confirming the information entered is accurate. All in all, compared to other registers around the world Companies House allows you to retrieve information more quickly and efficiently.
Many countries around the world are engaged in a race to improve the quality and transparency of information on their registers. Moldova may not be the first country that you think of with regards to corporate governance, but the register of enterprises there is a superb example of how a nation with fewer resources can simply, and effectively, create a transparent corporate register. While the development of a website that contains a database with a search function can be tricky, and often expensive, the Moldovan government has come up with a cunning solution. All 253,496 Enterprises registered in Moldova have their information input into one large excel format spreadsheet, the columns of which contain all relevant data on Directors, Shareholders as well as basic company registration details such as the type of company, its address and its status. The spreadsheet is updated weekly and is freely downloadable from the Moldovan Government open data portal with no login or restrictive licence required. This low-tech but smart method has propelled Moldova to the top of Opencorporates Open Data Index, a section of the list otherwise largely dominated by Western European nations.
Like all solutions, this one isn’t perfect - company accounts aren’t included by default on the open data portal. According to the law, financial statements are supposed to be provided as a public depository of financial statements on the site of the National Bureau of Statistics, however at present this depository is still under construction. In the meantime such accounts can be obtained through special information resources, the website of the Stock Exchange, or directly requested from a record office in person. Once the depository is completed however, and with recent laws passed commissioning a register for ultimate beneficial ownership, Moldova will have one of the most transparent registries in the world.
It’s an unfortunate fact that most national company registries around the world don’t allow free, unlicensed and transparent access. However, there’s a world of difference between how these registries work, and a great deal of variation with regards to how hard it is to actually access the data or documents you need. The Opencorporates ranking system works on the basis of evaluating which elements of a registry are available entirely for free, and while this is a valuable metric and a worthy goal for registries to aim for, some important elements can be overlooked.
Many registries aren’t entirely free but still provide a good standard of data with reasonable fees. For example Austria and the Central African Republic share the same ranking of 0/100. But looking closer we can see that these are not comparable. The Central African Republic does not have a business register, whereas the Austrian registry can provide a full excerpt from the Business register including registration details, director details and shareholder information, along with the most recent financial statement of the firm, all for a fee of €21.80. So while free access is a nice goal for a registry to aim for, it’s certainly not the most important factor if the fees are reasonable, and we should not solely evaluate registries based on whether you have to pay for them.
The majority of company registries worldwide fall into this bracket: Not totally free and transparent but still very useful if you’re able to pay a small fee or go through a brief registration process. On the better side of this spectrum is Austria as previously mentioned, where a small fee is required, or a jurisdiction like Norway where a similarly good standard of data is available after a brief registration process.
On the other side of this spectrum there are jurisdictions like Lithuania. It has an online register of companies with some features available to all, but with other more useful details locked behind a function that requires registration with a Lithuanian ID or a Lithuanian bank account. The free functions available aren’t bad - with basic access one can establish the name and existence of a company along with where it’s physically registered. However these details are likely unhelpful if you’re interested in doing more in-depth due diligence. There are two solutions to the problem of getting actually useful company information if you’re outside of Lithuania: Contact a person inside the country to check for you, or use a 3rd party aggregator service like Lursoft. Options like Lursoft are common in jurisdictions where the data exists but is artificially restricted or split across multiple databases, for a relatively small subscription fee you can have access to a vast amount of data relatively easily.
Although these private registries provide a good solution on a practical level, it’s never ideal when a private company has to be the one providing an authoritative source of information. One could certainly claim that a national register should be primarily concerned with providing access to people inside the nation itself, but in an increasingly interconnected world we can’t think of nations as airtight containers for business, rather nodes in a system. For example, the recent trial of Swedbank’s ex-CEO for allegedly laundering Russian funds via their Baltic branches and Transparency International’s latest report on abuse of limited liability partnerships in the UK have shown corruption in the Baltics, or any one country, can have huge implications for neighbouring jurisdictions.
While a transparent and online process is within the reach of many nations, there are quite a few where the logistics and technical capacity to build a system just aren’t yet present. As a result any enquiry of a company registry has to take place in person. While it’s inconvenient to those investigating from overseas, it should be stated that an offline register does not necessarily mean a bad register!
For example in Nigeria we can find an offline company registry that, with a quick visit to the office in person, allows you to obtain full registration details ( including information on company directors and shareholding detail) for a fee of approximately £10. Alongside the nascent online registry containing more basic company details, this is a great way to bridge the gap and shows a commitment to transparency.
On the other hand there are jurisdictions that appear to be actively attempting to conceal information, either by neglect or by design, making company information incredibly hard or impossible to obtain. The most egregious example of this comes from a British Overseas Territory, Anguilla. Anguilla itself does have a commercial register, and even a slick and clearly well designed webpage that allows registered users to interface with it. However, the purpose of the registry is purely to allow registered agents to set up new companies, rather than dispense any information about them. While registered agents have access to a basic search function for the registry, this is designed purely to check if the name of the company they wish to register has been used already, and has no further useful information.
There is an offline element to Anguilla’s registry, and one can make a request for information there, however at present they are limited to giving out the company name, status (active or dissolved), date of formation, registration number and the registered agent (which is generally the agent who set up the company, not an actual director). As such Anguilla manages to have the appearance of a functional register but with actually very little useful information available - a classic hallmark of a privacy jurisdiction: a country or territory that seeks to restrict company data from public use in order to encourage company registration there.
While there does appear to be some hope for greater transparency on the horizon, with the Anguillan House of Assembly this year passing a bill which requires a register to be maintained of the ultimate beneficial owner of each firm, it will be interesting to see this play out in practice.
Heading out into more open plains
While there’s certainly some way to go before we have free, transparent and useful access to company records around the world, it’s not all the Wild West. There are encouraging signs that the issue is finally starting to be taken seriously. The recent wave of sanctions against Russian assets has spurred a drive to make ultimate beneficial ownership disclosure a basic part of all nation’s company registries and the fact that even such privacy focused jurisdictions as Anguilla have to provide at least a plausible route for public access to such information shows a real change in attitudes towards this topic.
With an increased awareness of the issues associated with opaque corporate structures and the continued work of organisations like Opencorporates and Transparency International, it’s likely a much greater amount of company information will be available across the globe in the coming years. We hope registries around the world continue to follow the example set by those such as Moldova, Anguilla and others that are slowly but surely improving their systems’ transparency.
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