Global Witness (2018) Research: Key takeaways

Updated: May 3, 2020

The most common nationality for a PSC is British, covering 80% of all individual PSCs.

Registrations

· 87% of active companies to which the PSC regime applies are filing at least one PSC on the register.

· Of the 13% of companies that have not filed a PSC, not all of these are necessarily non-compliant. As per the UK’s rules, valid reasons for not disclosing a PSC include companies with more than four shareholders (e.g. where no individual holds at least 25% or more shares in the company).

Exemptions

· Only 58 companies claimed a trading exemption, which companies can receive if they have their shares listed on a relevant regulated stock exchange

· A further 199 individual PSCs have secured the right to keep their details off the public register, on the grounds that they face a serious risk of violence or intimidation.

Data Quality

· Lack of unique identifiers for individual PSCs, making it less easy to analyse. While the register includes the month and year of birth for an individual PSC, this is not enough in some cases to distinguish between two people, particularly for common names. The use of a correspondence address in combination with month and year of birth to create a unique ID for the PSC may also not be effective, as PSCs often list different correspondence addresses for different companies under their control. This makes it very difficult to accurately assess how many and which companies a given person actually controls. This is a fundamental challenge for investigations using PSC data.

· Lack of standardisation for certain data fields, which would help ensure the data provided is valid and realistic. For example, there are a number of PSCs with impossible or highly unlikely dates of birth, including someone who has not yet been born. Although the number of impossible dates of birth was small, it suggests there may be a wider problem of data validation. Similar issues with misspellings and inconsistencies in both the nationality and address country fields are found, making it hard to summarise information using these fields.

Non-Compliance

Around 1.5% of active companies are not currently complying with the PSC legislation. This figure primarily reflects the number of companies under the PSC regime who have not submitted any information to the PSC register. In many cases, this is because they have an overdue confirmation statement. Further research shows includes cases where people have misunderstood what it means to be a PSC, which should decrease over time. four ways in which individuals may be suppressing information on who really controls companies,

1. Filing a statement saying that a company has no PSC

Companies can say they have no PSC without any supporting evidence or checks by Companies House. In total, 335,010 companies have filed statements saying they have no PSC. While many companies legitimately fall into the category of having no qualifying PSC (e.g. because they have five or more shareholders), there is reason to believe that some companies may be using these filings to avoid disclosing their true owners. The fact that Companies House does not currently question these filings means they could be a way of skirting the law.

2. Naming a foreign corporate PSC that is registered in a country that does not have an eligible stock exchange

10,150 companies which list a corporate PSC not registered in any of the eligible countries. Companies that are listed on a relevant stock exchange are exempt from filing a PSC according to the UK rules. Specifically, companies can file a trading exemption if their shares are admitted on a regulated market in the UK, the European Economic Area or on specified markets in Switzerland, the USA, Japan and Israel. In a very limited number of cases, a corporate PSC could be registered outside the regulated markets but listed on one of the eligible exchanges.

In fact, nearly three-quarters (72%) of these foreign corporate PSCs are registered or have a correspondence address in a secrecy jurisdiction. By definition, secrecy jurisdictions have low levels of corporate transparency, resulting in little or no public information on company owners. As a result, thousands of UK companies still have their ownership obscured through companies in secrecy jurisdictions, which is exactly what the PSC register was meant to overcome.

3. Disclosing a person as the PSC who is also a PSC for hundreds of other companies

There are only 31 PSCs who control more than 100 companies, while there are over 800 directors who direct more than 100 companies. It suggests some individuals could be acting as ‘nominee’ PSCs in place of real owners. The whole purpose of the PSC regime is to reveal the real owners of companies, making the appearance of possible nominees problematic. However, while the PSC regime may still have weakness with respect to nominees, it has forced many companies who previously made extensive use of nominee directors to disclose much more detailed data on who really controls them.

4. Circular control structures

There are 328 companies on the PSC register that are part of circular control structures. A circular control structure is a group of UK companies that file another UK company as their PSC, with the final company filing the first company in the group as its PSC. The simplest example of this is where company A files company B as its PSC and company B then files company A as its PSC. UK corporate law prohibits circular shareholding.


Source: Companies We keep, Global Witness 2018 (https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/anonymous-company-owners/companies-we-keep/)

1 view0 comments