02 Feb Trust and transparency
The Regulatory Policy Committee (RPC) has published its latest findings on the impact of four proposed reforms aimed at improving the standard of transparency in corporate structures. The proposals, which originated in a G8 agreement, are expected to “reduce damage from illicit activity and improve trust in corporate governance.”
In its assessment, the RPC has concluded that the four proposals are fit for purpose with an estimated cost to business of £100m per year. The four proposals, which have been covered in earlier articles, are:
Coming in at an estimated annual net cost to business (EANCB) of £4.48m this measure aims to address the perception that opacity of control not only facilitates illicit activity, it also has the capacity to erode trust and damage the business environment. Measures proposed include action in respect of corporate directors and those acting as a front for others’ control.
With an EANCB of £97.5m this measure aims to address the problems associated with difficulties identifying the beneficial owners of UK companies. The government expects enhanced transparency, perhaps by way of a central register, to deter illicit behaviour, improve enforcement outcomes and promote good corporate behaviour.
The ‘cheapest’ of the proposals, this one carries an EANCB of £0.12m. Bearer shares enable opaque ownership of companies and thus frustrate the move towards transparency. The preferred option here is to abolish bearer shares, thus helping the UK to meet International Global Forum on Tax Transparency standards.
With no EANCB available at present, this proposal aims to reassure consumers who are considering cross-border purchases within the EU but are discouraged by concerns about dispute resolution. Proposed legislation would require member states to ensure quality ADR is available for all contractual disputes between consumers and business. This would require business to provide full information about dispute resolution alongside an EU-wide portal for resolving not only cross-border disputes but also those within a single country.
As these proposals originate outside of the UK, they don’t fall under the Government’s one-in two-out assessment. However, they all have important implications for corporate governance and control. The overarching drive is to reduce the chance of illicit activity whilst at the same time enhancing trust and transparency. By further opening up directors and owners to scrutiny the government hopes that companies will no longer be able to operate under a fog of control and that this will lead to more open and compliant organisational structures.