Legal entities: Building blocks of the modern world

Since OpenCorporates was founded ten years ago, we have been laser focused on providing high-quality and provenanced legal entity data for all.

In the early years, many people struggled to understand our fixation on legal entities. They were accustomed to using legacy data providers which identified companies by their addresses, names or other ill-defined identifiers.

But today, there is no longer any doubt that we live in a world of legal entities. Even what were once informal, cash-based transactions in the real world are now online digital experiences via explicit contracts with a legal entity.

As a result, anyone wanting to understand the modern world must start with legal entity data.

That’s why OpenCorporates, and our transparent data on legal entities, is needed more than ever: to shine a light on the building blocks that make up the global business world and promote a more trusted environment for everybody.

After all, you can’t transact, enter into contracts with or work alongside other organisations with confidence unless you know who you’re dealing with at the legal entity level.

What is a legal entity? Is it the same as a company?

A legal entity (also called a legal person, or unnatural person) is simply an artificial entity that is treated in law as if it were a person. They can own assets, owe money, enter into contracts, buy and sell goods and services, and break the law. 

But unlike a real person, they don’t have any physical substance – you can’t see or touch them, can’t put them in jail or stop them from travelling, as they are everywhere and nowhere, particularly in our online connected world – where you might be entering into a contract with a legal entity domiciled anywhere on the planet.

In OpenCorporates’ model, a company and a legal entity are the same thing. However when others talk about a company they sometimes mean different things. 

For example, there’s a difference between: 

  • all the companies in the Microsoft Group
  • a specific legal entity (“Microsoft UK Ltd”)
  • a vague reference (“Microsoft”)
  • or even a building or address – yes, really, some data providers don’t distinguish between the legal entity and an address it occupies or operates from

Crucially, legal entities act as proxies for individuals, or for other legal entities – that’s why they were created in the first place: so that investors could invest in something that had a personality and existence above and beyond the individuals who were owning or running it at that point. 

However, there’s an important consequence to this, particularly when you add the limited liability aspect, which means that the owners’ liability is limited to the money they invested in the legal entity. When things are going well, the owners and managers benefit from the legal entity, reaping the profits. 

When things go badly, however, the losses are taken on not by the owners and managers, but by the company’s employees (who may not get paid), the customers (who may not get the goods they have paid for), by suppliers (who may not get paid), and by wider society which might need to bail out pension funds and basically clean up the mess.

This by-product has not gone unnoticed by criminals and bad actors, particularly when you add the ability of legal entities to own other legal entities in complex networks.  

For example:

  • People can carry out illicit activities like bribery and corruption but conceal their involvement behind a web of legal entities, often spanning multiple jurisdictions – and including secrecy jurisdictions such as the British Virgin Islands
  • Legal entities can be rapidly set up to take advantage of initiatives like Covid-19 relief loan or procurement schemes, then dissolved before delivering the services agreed
  • Companies can be bought and their assets stripped, leaving huge debts behind

The transparent legal entity data revolution

As legal entity data provides the building blocks of the modern world, it is vital that this information is transparent and visible to everyone.

Anybody wanting to understand who they are doing business with has to start at the legal entity level. If they don’t, they are building this relationship – and their business – on shaky foundations.

This is true for investors, regulators, employees, consumers, journalists, tax officials and more.

A compliance officer or procurement specialist won’t be able to fully investigate a third party without knowing the legal entity they are dealing with.

Unlike the opaque data from legacy business information providers, OpenCorporates is bringing about an entirely new category of transparent data with the legal entity at its core – so you get the insight into the universe of legal entities you need, but in the transparent way you need it.

Its advantages include:

  • Provenance
    Every legal entity record is accompanied by a timestamp of when it was collected from the source, and a line of sight to that source.

  • Official sources
    Our data comes directly and exclusively from official company registers themselves, rather than third parties – who often manipulate or model the data.

  • A clear and consistent schema
    We present our data on over 200 million companies from 140 different jurisdictions in a standardised way so it can be easily analysed and compared, for example by data analytics tools.

  • Open access
    All our data is openly accessible to everyone via our website – not only those that can afford data subscriptions.

As more legal entities are created in increasingly complex, often digital, structures, we are expanding our database to include new companies. We are also working hard to ensure that our data is as fresh as possible.

This makes OpenCorporates the best lens through which to view the landscape of legal entities and, by extension, the world.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s