Why is nobody doing this?

A legitimate question in this context is why has the IT revolution and the democratization of software tools over the last decades, which has radically transformed major areas of economic life such as manufacturing and e-commerce, largely by-passed the company formation and governance space?

One possible answer is that with the advent of blockchains, only now is the technology available to build a 10 times better solution, and not just a 2x better solution.

Another factor is the inertia resulting from Governments invariably owning company registries as the “ledger of truth” of who owns and directs companies in their territory.

Consequently, the only way an independent software solution could achieve legal validity for transactions it hosts is by “syncing” such transactions with the registries.

However, with few exceptions, these Government registries are clunky:

• Some registries don’t allow for electronic fling and require manual, paper submissions;

• Those that do have a dedicated online portal often force users to enter data manually, which defeats the purpose of digitalization;

• User rights to official Government registries are commonly restricted to local filing agents who are subject to licensing requirements;

• Whilst some of the more modern registries have APIs that allow transactions to be piped in directly, use of such APIs is commonly restricted to locally licensed filing agents.(*)

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(*) For a quick overview:

• Outside the US, analogue registries can typically be found in smaller jurisdictions, such as Gibraltar or Malta, and also some of the most commonly used offshore jurisdictions, where restrictions on who is authorized to file are often a local employment scheme. Surprisingly, Japan’s registry is still largely analogue with mandatory use of the “chop” or wax seal.

• Singapore too seems to favor local employment over efficiency by restricting access to its company registry, maintained by its Government’s Accounting and Regulatory Authority (“ACRA”), to licensed Filing Agents who employ local (i.e. Singaporean Nationals or Permanent Residents) “Qualified Individuals” (“QIs”). Once linked to a local company, these QI’s or their authorized representatives would then manually enter required data via an online ACRA-hosted website, which despite a recent update is almost comical in its user unfriendliness. Even the most basic APIs, despite Singapore claims of being a “Smart Nation”, are absent.

• Hong Kong is in many aspects easier and cheaper than Singapore to setup and maintain a local company, as anybody can incorporate and look after their own company online. It has some APIs for use by locally licensed filing agents but still insists on paper fling for some processes such as share transfers in private companies, which need a manual stamp by the Inland Revenue Department before they can be lodged with Companies Registry.

• New Zealand and Abu Dhabi (which used the same technology vendor for its registry) have modern APIs so most transactions performed on blockchain would automatically sync with the registry.

• The UK too lets anybody who it considers a credible filing agent API into its official registry at Companies House in Cardiff.

• Finally, in the US corporate formation and filing is a State matter hence the requirements differ from State to State. All are fairly low-tech and some are non-tech, with paper filing via courier still the most-used method.