Monday 23 April 2018

Richard Curran: Privacy loophole might just cost Irish business its good reputation

Companies registered in the Isle of Man don't have to file publicly available accounts.
Companies registered in the Isle of Man don't have to file publicly available accounts.
Richard Curran

Richard Curran

A GROWING number of private Irish companies are using international corporate structures that enable them to avoid publishing their accounts in the Companies Office, while still enjoying limited personal liability if things go wrong.

Back in the 1980s and 1990s, there were a small number of private Irish companies, often family-owned, that registered as unlimited liability. This meant they avoided the stipulation under the Companies Act 1983, which obliges them to publicly file their accounts.

The benefit was obvious. They didn't have prying journalists, competitors or just nosey parkers, looking up how much money they were making. The downside was a risk; by opting out of the protection of limited liability, the directors or shareholders could be personally liable for the debts of the company if anything went wrong.

So, you had to be pretty rich and certain to avail of it, because you paid a price for privacy by taking a certain risk. Big-name companies that were unlimited included Martin Naughton's homegrown multinational Glen Dimplex, Dunnes Stores or Feargal Quinn's Superquinn.

But in recent years, a lot has changed. A growing number of companies have registered as unlimited in Ireland, but to protect themselves from risk, the Irish company is owned by a foreign registered limited company, often in the Isle of Man.

Isle of Man companies don't have to file publicly available accounts.

Every corporate structure is different and the motivations can have as much to do with legitimate tax efficiency, as privacy. But it becomes a win/win for the business, where they don't have to file accounts, yet still retain protections of limited liability.

Making private limited companies file accounts is a good thing. It is not just about business hacks like me seeking out a story. It is about creditors and people they do business with, assessing the position of the firm.


In circumstances where the company has public contracts or collects money on behalf of the State, it adds another layer of transparency and accountability. However, if a private company has a perfectly legitimate option to enter this win/win situation, they are naturally going to take it.

That is why it wasn't particularly surprising to read that the company behind the Go Safe consortium, which operates speed cameras on behalf of the State, had gone unlimited liability.

It had been making profits of around €50,000 per week in 2012. The more money it reports in profit, the more criticism it could face from people who hate being caught on speed cameras.

Unlimited liability status used to be like a club of wealthy people who knew they were financially secure. But during the boom, some property developers copped on to the trick of going unlimited while retaining limited protections using the Isle of Man.

Ironically, even more of them went unlimited this way during the crash, to shelter how much money they were losing. Some companies that have taken this option have not been the most financially secure.

For example, Treasury Holdings was unlimited but owned by Lemur Holdings Ltd in Jersey. Treasury went into liquidation in 2012. Liam Carroll's Vantive Holdings was owned by Morston Investments Ltd in Jersey and it fell apart.

Aer Arann was owned by Blueberry Ltd in the Isle of Man, yet went into examinership in 2010.

For others it appears to be very much about privacy. The Mater Private Hospital is owned by MPH Overseas Ltd in the Isle of Man. J&E Davy Holdings is also unlimited but owned through an Isle of Man limited company. Dunnes Stores is owned by Benlettery Ltd in the Isle of Man.

The speeding camera company is highly unlikely to accrue large debts and has an €80m contract with the gardai. It is likely to be very financially secure, but can still avail of a structure guaranteeing privacy along with limited liability.

Accountants say the situation developed in Ireland because of the needs of very large global multinationals. Companies like Intel, HP or Microsoft would not want competitors to know exactly how much money they were making in an individual market.

By allowing them to use unlimited liability vehicles, their competitive privacy was protected, while having an overseas limited parent protected the firm if anything went wrong.

This seems perfectly reasonable because unlike many of these other private Irish companies, major global multinationals file their worldwide group accounts. Most of them are listed on the stock market and have to file accounts for the entire group.

However, in the case of many smaller Irish companies, the system, as it stands, allows them to have it both ways without ever filing publicly available accounts anywhere.

The current system is good for the businesses that are availing of it. You could argue that it adds to the attraction of Ireland as a place to do business. But does it?

If you have companies shielding their profits or perhaps even their losses, through Isle of Man companies, without taking the risk of unlimited liability, surely it makes it more difficult to do business with them.

Anyone who has concerns about the financial strength of one of these businesses is left in the dark. That is the whole point of the Companies Act.

However, we also want Ireland to be an attractive location for global investment. Government policy is to keep pushing Ireland up the business rankings.

The question is whether using the system in a way it was never intended could ultimately chip away at – or even undermine – the basis on which we do business.

Irish Independent

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