A Conservative MSP is exploiting a loophole in parliamentary rules to avoid declaring the value of her stake in a property company, The Ferret can reveal.
Parliamentary rules say MSPs should declare the value of any shares they have, if that value exceeds £32,235, which is half an MSP’s salary.
But there is no guidance on how MSPs should value their shares and Tory MSP, Alison Harris, has used a “nominal value” which, according to experts, is not the usual way of valuing a company.
Critics have called for the rules to be reformed so that MSPs are forced to disclose the true value of their holdings in private companies, as well as the dividends they receive.
Harris does not declare the value of her two-thirds stake in property rental firm, Georgian Finance Company, in the register of members’ interests.
Company accounts show this firm owns property worth £1.47 million and has £174,000 of cash in the bank.
Georgian Finance Company also owes £1.1 million so its net assets are about £472,000. Net assets are often used as a ‘floor value’, a very conservative estimate of what a company is worth.
Harris has a two-thirds stake in the company. Two-thirds of its net assets are worth £315,000. This is far above the £32,235 threshold for declaring on the register of interests.
When asked why she does not declare the value of her stake in this company, Harris said she used a “nominal value” of £6,667 as the market value.
Prem Sikka, a professor of accounting at the University of Sheffield, said: “I have never across a company whose value is determined by the nominal price of its shares.” He said that net assets is a more common way of valuing shares.
An accountant from one of the big four accounting firms, who wanted to remain anonymous, added that they had also never seen a company valued using a nominal value before. “The nominal value is a totally arbitrary value that has no relationship with the market value of your interest,” they said.
Harris said she used the nominal value because of “restrictions placed on the sale of these shares, and the fact that as a 66 per cent shareholder I am unable to realise the asset value from the company”.”
When asked what these restrictions were, she declined to answer. “I’ve provided you with as much information as I can in relation to your queries,” she said.
“In terms of the ‘restrictions’, you’ll find all the information you need in the Companies Act.” The 2006 Companies Act is 761 pages long and she didn’t say which part is relevant.
Some privately-held companies state in their articles of incorporation that shareholders cannot sell shares without the approval of the directors. Georgian Finance Company’s articles of incorporation are not available on Companies House and when asked if this restriction was in them, Harris said she had already answered this question. When asked to clarify further, she declined.
Although she has not been a director since she became an MSP in 2016, Harris is listed in accounts as the company’s ultimate controlling party. The directors are 23-year old George Harris and 84-year old Marion Jack. Harris, who is an accountant, refused to say whether they are her son and mother respectively.
According to company records, Alison Harris’s middle name is Ada and she was born in July 1965. Scotland’s People has no record of any Alison Ada Harris being born but an Alison Ada Jack was born in Glasgow in July 1965 – when Marion Jack was 29. An Alison Ada Jack married a Nigel William Harris in Falkirk in 1995.
According to company records, George Harris was born in June 1996. According to Scotland’s People, there was one George Harris born this month. He was born in Falkirk, where Alison Harris was married and where her accountancy practice is based, when Alison Harris was 30.
As well as not declaring the value of her stake, Harris does not declare what property she majority-owns through Georgian Finance Company. Under parliamentary rules, she does not have to. MSPs only have to declare property they own as individuals not those they own through companies.
Harris also declares that she received no remuneration from Georgian Finance Company. But, while she doesn’t receive an income, she is likely to benefit from the increasing value of the company.
Retained earnings and dark dividends
The ‘retained earnings’ of Georgian Finance Company increase by around £70,000 every year. As she owns two-thirds of the company, she is likely to benefit from this.
Commenting, Harris said that, as a shareholder, she had no automatic entitlement to these retained earnings and that distributions are determined by the company’s directors – George Harris and Marion Jack.
“Transparency is the cornerstone of a healthy and functioning democracy, and the public deserves to have a full understanding of what the financial interests of our elected representatives are." Unlock Democracy
Another limitation of the register of MSPs’ interests is that several MSPs with valuable shares in companies do not declare how much they expect to receive in dividends.
The Cabinet Secretary for the rural economy, Fergus Ewing, declares he owns over £240,000 worth of shares in six different investment trusts.
He also owns shares in 33 other investment trusts but does not declare the value of these as individually each share is not worth £30,000 so doesn’t have to be declared.
Similarly, Tory MSP Bill Bowman declares he owns over £870,000 in 13 different investment trusts and companies.
Neither Bowman or Ewing declare how much they expect to receive in dividends from any of these shareholdings. It is likely to be thousands of pounds every year.
Parliamentary rules do not say that MSPs should declare dividends but some MSPs do. Conservative, Liam Kerr, says he receives between £3,000 to 5,000 worth of dividends from a legal company he owns every year and Green, Andy Wightman, declared a £40 dividend from a community hydropower scheme.
Unlock Democracy called for the rules to be reformed. “Transparency is the cornerstone of a healthy and functioning democracy, and the public deserves to have a full understanding of what the financial interests of our elected representatives are, ” said spokesperson for the group, Sarah Clarke.
“We can only effectively scrutinise the political choices being made by MSPs if we know what financial interests are influencing their decisions. The current gaps in parliamentary guidance need to be filled in, to give the public trust in political processes.”
In response to questions about Bill Bowman, a Scottish Conservative spokesperson said: “All MSP holdings are disclosed in line with Scottish Parliamentary procedures.” Fergus Ewing did not reply to a request for comment.
The limitations of the register of members interests have been highlighted by The Ferret before, when we reported that Derek Mackay did not declare hospitality he received from the property industry at a four-star hotel in the South of France.