Charles Dickens was no fan of limited liability. The Victorian novelist and social commentator was of the view that the Limited Liability Act of 1855 would diminish the personal responsibility of directors for their company’s activities and encourage corruption.
He frequently lampooned the joint stock companies, which along with the Limited Liability Act turbocharged the industrial revolution. They channelled capital into new enterprises by reassuring investors that their exposure was limited to the money they put into the new business.
It’s a long way from Victorian London to Kildare Street in Dublin and we have no way of knowing what Dickens would make of the Government’s proposal to water down one of the key elements of limited liability – that individuals who avail of it are publicly identified with their names and addresses on a public register. It’s unlikely he would approve.
The Department of Enterprise, Tourism and Employment is seeking the views of the public on a proposal to change the Companies Act 2014 so that addresses of directors do not have be disclosed on the register of directors that every company must keep, or in filings in the Companies Registration Office (CRO).
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The only exception to the law at present is for directors who feel their personal safety is at risk by virtue of their address being public. They can get an exemption and use a service address if they have a supporting statement from a Garda chief superintendent or a more senior officer.
The new proposal has its genesis in a report from the Company Law Review Group. It recommended that the Companies Act be amended so that a contact address – rather than home addresses – be published on the register of directors and filings in the companies office.
Law-enforcement and regulatory bodies would still have access to the addresses from the CRO. Everybody else would have to go to court to get the addresses “for the purpose of access to justice”.
The changes would appear to have the support of everyone from OnlyFans content creators to US multinationals.
Social-media influencers are worried that if they don’t pay their taxes and are named on the Revenue tax defaulters list their personal safety might at risk if their addresses are publicly available.
The obvious solution seems to have escaped them. Likewise, directors of multinationals who fear being targeted because of their companies’ activities.
Safety concerns are the theme of the arguments in favour of the changes made by the Law Society and other professional bodies.
The availability of directors’ addresses “makes Ireland an unattractive location for directors of certain companies”, according to the Law Society. Some might argue this is a good thing.
If you set up a business – something that is seen to be in the wider public interest as it creates wealth – your losses are socialised if it fails. You take a hit, but it’s limited to the money you put in
It’s worth noting that the proposed measures are analogous with changes brought in by the UK in 2009 and there is no uniform approach in the European Union as it is seen as a national competence.
The Company Law Review Group does reference a European Court of Justice ruling that bans naming beneficial owners of companies – if they have used legal ways of to avoid being named as shareholders on published accounts or returns. There are also issues related to the EU’s General Data Protection Regulation.
Unsurprisingly, journalists are not big fans of the proposed changes. A director’s address is a useful piece of information when trying to establish the ownership of a company and unravel complicated company structures often aimed at disguising ownership.
It is not a trivial point at a time when the mood music around corporate responsibility has changed dramatically.
It is axiomatic that changing the rules on directors’ addresses can only decrease transparency. It is also one reason fewer to comply with the law for company directors and owners.
These arguments may seem more principled than pragmatic. But at the core of the debate is the logic of limited liability. In its simplest form, limited liability can be seen a social contract.
If you set up a business – something that is seen to be in the wider public interest as it creates wealth – your losses are socialised if it fails. You take a hit, but it’s limited to the money you put in. Your customers, employees and creditors (often including Revenue) suck up the rest.
Part of this social contract is that you were publicly identifiable. In the 1850s, this meant your name and address being on a public register that required some effort to access.
That has changed with the digital revolution, which made the information much more accessible and in the process created risks to personal safety that did not exist over the past 170 years or so. How real these risks are and to what extent they have increased is hard to measure.
The issue is really whether these unquantifiable risks are justified by the equally unquantified benefits of transparency.
Does having you address as well as your name and date of birth publicly available make you less likely to abuse limited liability? Dickens would probably have said ‘yes’.
