Shipowners are taking full advantage of flaws in the UK company-registration system to use it as a bargain basement for company-formation services and to avoid transparency. My company's experience in marine credit investigations has made it clear to us that a reform of the UK Companies House registration system is urgently needed to give it credibility.
Some offshore jurisdictions could be named that are more notorious, but the chief difference between them and the UK is that it is cheaper.
You can register a company in the UK for under £20 ($28). The online process has you up and running the same day. A few pounds more buys use of an accommodation address, placing you in the swishest part of town when you are really thousands of miles away.
To be sure, the UK needs to be competitive. In these post-Brexit times, no one wants to see potential investors or employers driven to set up shop elsewhere. But shipowners abusing this flaw are not potential investors here, and most certainly will not recruit British seafarers. They are just saving themselves a few quid.
Not only is company registration in the UK cheaper than almost anywhere else in the world, so is the subsequent annual fee of £13. That is, if you decide to pay it. If you do not, your company will be “compulsorily dissolved” after 18 months or so. Not necessarily a bad thing, as it avoids you having to disclose any financial information, real or imagined. You will probably have incorporated a few other companies by then, so it is simple to transfer ongoing activities to one of them.
And if you are sentimental about the name of your first British company, you can incorporate a new company under that name with barely a hiccup. Your charterers, insurers, suppliers need be none the wiser.
Formerly, offshore jurisdictions were more attractive to shipowners because they offered something priceless — confidentiality.
Many shipowners prefer to describe themselves as brokers, agents, managers or by other euphemisms. To get away with that, you need confidentiality. Yet the UK requires complete openness. Company registration documents can be viewed on the government’s website, free of charge, along with details of directors and persons with significant control (PSCs).
No confidentiality in the UK, then? Wrong!
Yes, the information must be provided, but there are almost no checks to establish whether it is accurate, honest, up to date or relevant. Consequently, a lot of company information on the website of the UK Companies House is incorrect, misleading, out of date or just plain wrong.
Although it is responsible for registering companies and entities such as limited liability partnerships and ensuring they comply with the relevant legislation, Companies House is required to accept documents in good faith. It does not have the power to query documents.
Recent cases that have come to our attention include several gentlemen using the same London address but based in Shanghai. Each one owns and manages an English company, and each organisation owns and operates a single tanker. Are these individuals all employees of a single ultimate owner? That is not a question Companies House can investigate.
Similarly, a woman in Moldova claims to be the PSC of several limited partnerships sharing an address in Edinburgh. We have linked one of these to a tanker now subject to US sanctions for loading in Venezuela.
Again, a marine company we are aware of was struck off the register in December 2018 but was replaced by a company of the same name, incorporated in June 2019 under the same management.
We also encounter companies reporting themselves as “dormant” (non-trading) when we know that is not true.
Navigators the world over rely upon the accuracy of British Admiralty charts. Our corporate governance falls well short of that standard. As abuse is tolerated, so it increases. Companies House must be given the power and resources to query information and, when necessary, require evidence in support. Our corporate registry should be as good as our charts.
Roger Symes is director of Marine Debt Management,
a UK-based credit reporting and debt collection agency
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