Workshop on Business Registers and their Role in Business Statistics

1. Workshop on Business Registers and their Role in Business Statistics in the Eastern UNECE Region - 5 October 2009 Country Experiences in IdentifyingEnterprise Groupsand Incorporating them intoStatistical Business Registers

2. Definitions • Existing situation • Issues Developing Enterprise Groups

3. Businesses are becoming more complex • Accounting systems differ from their operating structures • Structures cross national boundaries The Context

4. Enterprise Group – group of legal units or enterprises under common control • Enterprise – smallest group oflegal units within an enterprise group with a certain degree of autonomy • Legal Unit – the administrative unit, usually from a system requiring the registration of businesses, usually equating to an enterprise Statistical Units (EU Standard)

5. In the past the BR was a list of establishments (local kind of activity units or local units) – e.g. factories, mines, shops • Now most BR have moved to a list of legal units, often showing the relationship between the legal unit and its establishments • In the European Union, countries have developed (or are developing) systems holding relationships between legal units The Statistical Business Register (BR)

6. Incorporated (often called a company or corporation) • Partnership • Sole proprietor • Government (central, state or local) • Non-profit Main types of legal unit

7. The enterprise group is a cluster of legal units under common control • This is usually through the ownership of shares • The owning legal unit may have direct or indirect control through >50% of the shares or, occasionally, through a controlling interest at board level • A legal unit can be controlled by only one legal unit but other legal units may have a minority interest The Concept of an Enterprise Group

8. All enterprise groups are defined by the relationship between one legal unit and its immediate parent • This generates a complete tree structure • The legal units form a cluster of control • One legal unit is the group head – this is usually an incorporated business but may be a government body or non-profit organisation Enterprise Groups

9. Example of a Global Cluster of Control CLUSTER OF CONTROL US DE GB FR GB AU

10. The truncated enterprise group is the cluster of legal units within a country • Legal units can operate only in one enterprise • Enterprises based on more than one legal unit are allowed, provided all of the legal units are in the same truncated enterprise group Truncated Enterprise Groups

11. Truncated Enterprise Group for GB (and DE and FR) US DE GB FR GB AU

12. The Global Group US DE GB FR GB AU

13. 1 1 2 2 3 3 Truncated Enterprise Group: 4 legal units = 2 enterprises 4 4

14. Maintaining a list of establishments, usually though a census of businesses • Using administrative sources for identifying legal units (business registration, tax systems etc) • Relating establishments to their legal units • Creating enterprises based on legal units, for the more complex businesses • Creating ownership relationships to form enterprise groups Stages of development

15. Administrative sources (e.g. company accounts, National Bank Solvency Centre (Serbia)) • Statistical surveys (e.g. annual structural business statistics requesting ownership details) • Private sector databases (e.g. Dun and Bradstreet, Bureau van Dijk, Experian) • Profiling (direct contract with businesses through visit, telephone or mail – feasible only for a few large businesses) Sources for enterprise groups

16. Not all information on relationships is public • Sources are incomplete and not standardised • Structures are often complex and include lots of legal units that are not active Quality of sources (1)

17. Businesses change their structures frequently • Businesses have operational structures that differ from their administrative structures • Acquisitions and mergers are common but take time to settle down Quality of sources (2)

18. Business registers are often large • They generally hold list of business units but not the relationships between them • Even when they hold relationships, it is difficult to manage changes in the relationships Technical issues (1)

19. It is expensive to capture information on relationships • Changes to structures may be notified only after a delay or not at all • Changes may be notified out of sequence Technical issues (2)

20. The immediate owner is the legal unit with a controlling interest • The ultimate beneficial owner or global group head controls all legal units in the group • The country of the owner is the country of registration • This is difficult where “tax havens” are used or where there is a family group or a natural person runs the group Country of Ownership

21. As many important enterprise groups operate outside national boundaries, the statistical office may not have the authority to collect information for the whole group • Even within the national boundaries, it may not be possible to share information between authorities • Private data suppliers will usually not have complete access to information Sharing Data

22. With all of these difficulties, why bother? • Statistical data collection could have under or over coverage, both nationally and globally • Foreign Affiliate Trade Statistics require knowledge of all owners and subsidiaries outside the national boundaries • Foreign Direct Investment Statistics require knowledge of immediate owners and subsidiaries outside the national boundaries • ............... The Role in Statistical Systems

23. The European Union (EU) thinks it worthwhile: • Business Registers Regulation • EuroGroups Register project • A Business Register with enterprise groups can provide a direct route to substituting survey data by administrative (accounting) data Is it worth it?

24. What steps can be taken?