PRIVATE companies are owned by small number of private shareholders whereas public companies raise their capital from the public by being listed with stock exchanges and selling shares to the public. Privately-held companies are mostly family-run enterprises. These companies at best get some capital from venture capitalists or private equity firms. Therefore, unlike public companies, private companies are not legally bound to disclose business and accounting information to the public. Only government agencies like the National Board of Revenue and the Registrar of Joint Stock Companies have access to their database which is kept confidential. As a result, researchers, suppliers, consumers, employees and trade unions do not get ready information about these companies. However, some companies鈥� websites give some basic information showcasing their products, management, investors, board members, press release, media coverage and videos.
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Government regulations
IN THE USA, private companies including family-owned businesses, sole proprietorships and majority SMEs are required to file financial statements with the secretaries of states in the state (Corporations Division) where they are registered. These documents are not public but restricted to government use and give the government the ability to track and be appraised of larger market forces and shifts in the economy. Similarly in UK, all companies, public and private, must file annual accounts with the Companies House. Micro and small entities may prepare an abridged version of accounts which has less detail by omitting certain balance sheet items. EU company law requires private businesses to file balance sheet, profit and loss account, annual report, auditor鈥檚 report with the national business register. Indian and Bangladesh Companies Acts have definite regulations on both private and public company accounts to be submitted to the Registrar of Joint Stock Companies.
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Public has access to private companies from government agencies鈥� database
IN THE US, Library of Congress has private company profile. Free basic information includes financials like revenue, profit and assets. For detailed financial information there is purchase option. In the UK, Company House discloses some basic information free of cost but detailed financial information comes with a fee. In India, the ministry of corporate affairs supplies private company information, including financial data on subscription bases. The cost involved is Rs 100 for company documents on portal and certificate of incorporation, and Rs 25 per page for any other public document. In Bangladesh, financial statements are not allowed to the public from the Registrar of Joint Stock Companies. Only government agencies have the access. The RJSC has its own form for companies to file information like turnover, gross profit, net profit after tax and standard balance sheet items. The government requires the Institute of Chartered Accountants of Bangladesh to install a document verification system, DVS. All companies submit their audited financial statements to the document verification system of the Institute of Chartered Accountants of Bangladesh. Government agencies and banks have access to these data but the public, including researchers, have no access.
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Private commercial data providers
IN THE US and the UK, there are some private databases which help researchers by selling reports and information. Privco, D&B Hoovers, S&P Capital IQ, Data Axle Reference Solutions are some databases in the US that provide private company profiles including revenue, investment history, valuations, executives and competitors. Hoovers Company Records contain company overviews, financials, histories, news, officers, employees, products and competitors on more than 18,500 public and private companies and international companies. They collect information from more than 5,200 Yellow Page, Business White Page telephone directories, federal, state, provincial and municipal government, chamber of commerce, leading business magazines, trade publications, major newspapers, industry and specialty directories. Orbis, Amadeus, Vainu are some private databases in Europe. Some databases offer the possibility of downloading financial information like sales revenue, cost of goods sold, operating expenses, property, liabilities and private equity for a small fee.
In India, Bloomberg provides private company information at economical prices. This database has a qualified team that possesses specialised knowledge and skills and gathers authentic data from several sources. In Bangladesh, the Business Directory of Bangladesh and the Bangladesh Companies Database offer basic information on importers, exporters, trading companies, service providers and their products, but no financial information is available.
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Research on private companies听
RESEARCH on private companies is increasing over the years, particularly in the developed countries. Like in public companies, researchers are publishing articles on private companies using their published data. They are working in the same line with public companies on topics, once considered confidential, like financial statements, accounts, disclosure, audit and audit fees, income shifting, tax, investments, earnings quality, litigation, competitive environment. They are even comparing these topics between public and private companies. Private company database nowadays is no longer that confidential as in the past.
Most of our research on local businesses is done on publicly listed companies, stock exchange listed that is, where data is available online through annual reports and other website information. Secondary data is used for this research. Research on private companies is scarce because private companies are not legally required to publish their information. They also do not have active websites. Importantly, private databases like the Business Directory or the Bangladesh Companies Database do not provide sufficient information, particularly financial information, necessary for research. As a result, our academics research on private companies using primary data collected through interviews. These are mostly perception data which is very subjective and prone to manipulation. One problem of interview data is that if I ask you how you are I expect a reply 鈥� good. However, a person is healthy or not has to be measured scientifically and objectively from medical records.
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Need for more research and more data on private companies
THERE are only 300 to 400 publicly listed companies in Bangladesh whereas, according to available sources, there are around 200,000 private companies. There are widespread allegations of non-competitive environment like syndication, money laundering, over and under-invoicing, tax evasion, product adulteration, governance problems, labour problems and low wages and salaries for workers but excessive remuneration for owners and executives, environmental pollution and financial statement manipulation, among many others. The country needs a higher knowledge base through facilitating wider access to these large private companies. The government should frame some regulations for public access to private business data through mandatory company website with at least some abridged financial data. The Registrar of Joint Stock Companies may also provide access to their database on private businesses for universities and research organisations.
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Access to private companies in special economic zones
THE government has built special economic zones, SEZs, by providing institutional capacity building, infrastructure development and land development. Companies in SEZs enjoy various tax benefits like corporate income tax holiday, exemption of customs duty, VAT and land development fees. Rights to Information Act 2009 suggests for access to accounts of the SEZs. Subsidies to these companies in fact reduce public provisions for the common people. These subsidies reduce the scope for redistribution of income and can be considered as the public financing of private companies. Although the companies do not raise capital from the public, they receive hard-earned public tax money in the form of subsidies.
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Dr Dhiman Chowdhury is professor and chair of accounting and information systems, Dhaka University.
