Enforce filing transparency rules

Should private companies be just that? Their obligation to file accounts — in place in the UK for 50 years — is far from universal. But politicians should not heed calls to dilute transparency rules. Instead they should be sure to enforce them.

Transparency is not an unalloyed good in the view of critics such as billionaire inventor James Dyson. He complains that rigorous UK reporting rules allow foreign rivals to deduce a lot about his business, while he can find out much less about theirs.

This tide shows no sign of turning. Disclosure rules have recently been strengthened in the EU, India and Australia, partly due to a backlash against tax avoidance. The US is an exception. The gap between transparency rules for quoted and private companies is blamed for companies’ reluctance to list. Efforts to close the gap focus on reducing the burden on US quoted companies.

Rules elsewhere are getting tougher. But they will have little effect if enforcement is weak. In the UK, an astonishing number of companies fail to comply with disclosure regulations. A forensic accountant recently found that only 18 out of 2,407 US companies with UK branches had filed accounts.

Nonprofit OpenCorporates says three-quarters of foreign companies with UK branches have not filed accounts. Only in a minority of cases are they available elsewhere.

This poor record is partly down to the registry’s inability to strike off branches of foreign companies. But critics say it also highlights Companies House’s light-touch approach. It relies on error spotting by users to uncover fakes such as the company director named Il Ladro di Galline — or chicken thief — who listed his occupation as “truffatore” — or fraudster. A recent prosecution of a campaigner who tried to expose such frauds was ill-judged.

Nonprofit Global Witness says that more than one in 10 companies failed to identify their controlling shareholders, despite a new law requiring it. London, May 8