Transcript Country Experiences in Identifying Enterprise Groups and Incorporating them into Statistical Business Registers Workshop on Business Registers and their Role in Business Statistics in the Eastern UNECE.

Country Experiences in
Identifying
Enterprise Groups
and Incorporating them into
Statistical Business Registers
Workshop on Business Registers and their
Role in Business Statistics in the Eastern
UNECE Region - 5 October 2009
Developing Enterprise Groups

Definitions

Existing situation

Issues
The Context



Businesses are becoming more complex
Accounting systems differ from their
operating structures
Structures cross national boundaries
Enterprise Group – group of legal units or
enterprises under common control
Enterprise – smallest group of legal 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)



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)

Incorporated (often called a company or
corporation)

Partnership

Sole proprietor

Government (central, state or local)

Non-profit
Main types of legal unit




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




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
Example of a Global Cluster of Control CLUSTER OF CON
US
DE
GB
FR
GB
AU



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
Truncated Enterprise Group for GB (and DE and FR)
US
DE
GB
FR
GB
AU
The Global Group
US
DE
GB
FR
GB
AU
Truncated Enterprise Group: 4
legal units = 2 enterprises
1
1
2
2
3
3
4
4
1 Maintaining a list of establishments, usually
though a census of businesses
2 Using administrative sources for identifying legal
units (business registration, tax systems etc)
3 Relating establishments to their legal units
4 Creating enterprises based on legal units, for
the more complex businesses
5 Creating ownership relationships to form
enterprise groups
Stages of development




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

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)



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)



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)



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)
•
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



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

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
Is it worth it?


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
What steps can be taken?