ECCMA Working Paper by Peter Benson
Introduction
Registrars are the guardians of legal identity and legal ownership. Think of a world without registrars – how would you be able to prove you are who you say you are and how would you be able to prove that you own anything? When you produce your birth certificate, your company formation certificate, or a title to a car or a property, take a minute to thank the registrars who made this possible.
Government is a framework of authority and accountability where a particular group sees fit to give up some of its freedoms and entrust a government with the authority to make rules and the authority to enforce them, the rule of law. The role of registrars is enshrined in the fundamental principles of government, the identification of legal entities and the ownership of property, the fabric of society and wealth.
This paper provides a brief overview of the significance of registers and registrars in modern society.
Names
Mere physical existence is not sufficient; to be recognized by a society requires an “identity”. Even in the most primitive societies without physical records, individuals, objects, and locations need names as without names the most basic discourse “Jack and Jill went up the hill” is meaningless. Written records became useful as societies grew and became more complex and so too did the need for differentiation and precision: which hill? which Jack? and which Jill?
With the unambiguous identification of objects and locations came the ability of societies, through their governments, to create “rights” to use these objects or locations: “Are you talking about my hill? I never gave permission for Jack or Jill to climb it, they are breaking the law – call the police!”
Native Americans are rumored to have called surveyors the “land stealers” and for good reason. The role of a surveyor is to identify and describe land, the first step in defining, then transferring, ownership.
The law of contract
A contract is simply an agreement or promise made between two or more consenting parties and enforceable by law (see legaldictionary.net/contract-law/). It is through the enforcement of the law of contract that a government creates wealth.
The laws of contract rapidly became too complex for the mere mortal to understand, and specialist skills were needed; these skills are provided by lawyers. Documenting the transfer of property was a prime function of lawyers, but they did not stop there. Lawyers found ways of creating property and, with it, wealth from nothing. This is not the subject of this document and others have done a much better job of describing the legal magic of exploiting laws to create wealth, but the essence lies in the law of contract where any obligation can be monetized if it is cleverly coded by a lawyer. The biggest challenge for such lawyers is to stay within the law itself or rather ahead of another group of predominantly lawyers, the politicians, and their ability to create or change laws.
Governments form courts to enforce laws and resolve disputes. Key to this process is the identification of the parties as “legal entities” and their legal rights or obligations; registries are critical to this process.
Many organizations keep registries for many purposes; they keep registries of their customers, members, assets, products, and services, but when a registry is created by government through a law or a regulation it takes on a whole different dimension. Registrars are the managers of registries created by law.
Registries
A government registry is rather simple: it is an official record of events that is of interest to the government such as a birth, a marriage, or a death as in the case of vital records or the transfer of legal rights property such as land as in a land registry.
There are two fundamental types of registries, those that are records of convenience and those that confer rights.
Before registries existed, rights and obligations were created through written contracts and many of these became common and recognizable as certificates, an “I owe you” (IOU) letter is a good example. Registries were first and foremost a simple and convenient way to keep track of certificates. Churches kept track of their congregations by registering births and deaths as well as the contractual obligations freely entered into through marriage not forgetting the obligation of the flock to maintain the fabric of their spiritual wellbeing through voluntary “donations”. Government leveraged the church records to track its citizenry upon which they conferred security and the right to use their courts in return for the obligations to maintain the fabric of their temporal wellbeing through mandatory taxes.
Key to any registry is the ability to find the registry and then identify an entry in the registry, which is the reference. Churches kept chronological records, so knowing the location of the church and the date would allow you to find the record of a birth, marriage, or death. Land registries were kept at government offices; again, records are kept in chronological order, so knowing the location of the office and date of the transaction helps. In many cases, the books are given names or numbers and you can see this in older land title and birth records where the reference is the location, book name, page, and line or paragraph number. Laws themselves exist in a registry (the penal code or highway code for example) and laws are given identifiers to make it easier for the police to cite you for failing to comply with them. These identifiers can be complex as they reference a specific paragraph in a specific document such as “75 Pa.C.S.A. Vehicles § 3362 Pennsylvania, maximum speed limits, sign requirements, and fines,” the all too familiar reference on a speeding ticket.
A law or regulation may be effective when it is signed hence the phrase “signed into law.” In many countries, however, a law is only effective when it has been published in the official register which is often called a bulletin or gazette.
In the chicken or egg scenario, certificates came first, and public registries were created to make it easier to keep track of certificates, titles, or deeds. It was probably also a good idea to register a debt where the loan contract gave you the right to demand the transfer of the property in the event of nonpayment.
Certificates can get lost or destroyed and they are easy to copy so it is not surprising that over time registries became the authoritative record and certificates, titles, and deeds became nothing more than certified extracts. The switch from a registry as record of convenience to a registry as the authoritative record can have interesting consequences, some intended such as the reduction in fraudulent certificates but there are often unintended consequences too.
In the United States, companies selling shares to the public must disclose their financial records by filing forms with the Security and Exchange Commission (SEC). To make it easier to analyze and compare financial records, a standard representation of the financial records in a computer processable format was agreed. After a trial period, filing an electronic copy in the standard format was made mandatory. It was not until a new law making the electronic record “the authoritative record” was passed that things really changed. Until then, “mistakes” discovered by analysts in the electronic filing were simply dismissed and they were referred to the “authoritative” hard copy. A lot of things can happen on the markets in the time it takes analysts to correct a “mistake”.
Torrens registries
Another important example that persists to this day is the difference in land registries and the cost associated with the transfer of property. Many countries operate under a “Deeds Registration System”. In this system the validity of property titles is based on the common law principle of priority. Titles are registered but the registry is not “authoritative”, and the validity of a title requires proof of the chain of title which requires a title search. A property title search can be a long and complex process requiring a great deal of effort and time to search and verify the history of ownership of the property. There is always a risk that a title is invalid, but the risk is, you guessed it, insurable. Both the search and the insurance policy are expensive and represent a significant cost to property transfer. The alternative is title by registration in a Torrens land registry; a Torrens land registry is “authoritative”, and once registered the title is guaranteed by the registry and a title search and title insurance are no longer required. Property titles registered in a Torrens registry can still be contested in court, but the outcome is very different. Under the deeds registration system, when the registry is not authoritative, if a court rules that a title is invalid, the buyer loses their investment; under a Torrens registry, the buyer is untouched and the party that successfully contested the title is compensated for their loss by the registry. The Torrens title system was the adaptation of a system used to register and transfer ownership in ships and today it is a common system used to register titles for vehicles as well as other property including stocks and shares. In the US, title insurance companies, abstract companies, and title lawyers in general have vigorously opposed using the Torrens system for land because it makes the need for these services obsolete.
A closer examination of the benevolent nature of a government maintaining a land registry for the convenience of its citizens indicates that it too benefits from the register. Most governments have laws that require that land transactions must be “registered” and the clue as to why this is when the registry is not a Torrens registry may lie in the common alternative name for a land registry as the Property Tax Registry. After all, governments do need to know who is responsible for paying real estate taxes.
Corporate registries
Corporate registries are registries where corporations and, in some countries, limited partnerships, trusts or any “businesses” are registered. The registration represents the recognition by government that the organization is a legal entity. The date of registration is sometimes referred to as the date of formation: it is the corporate date of birth. Key to this process is the registration of a legal name which must be unique within the jurisdiction of the registry.
Corporate registries are fundamental to the concept of a legal person as different from a natural person, an individual. Both legal persons (corporations) and natural persons (individuals) are recognized as legal entities, and this allows corporations to participate alongside natural persons in contracts, to sue and be sued, and to own property. The only real difference is that legal persons can only be punished through fines, they cannot be put in jail. Just as corporate registries are the midwives that give birth to legal persons, they are also the undertakers as by canceling a registration they are in effect disposing of the remains of a defunct corporation.
A corporate registry is a database, and each entry is given a unique number which is the Authoritative Legal Entity Identifier (ALEI) sometimes called the local business number.
It is important to note that an ALEI is different from the ubiquitous tax identification number (TIN). It is generally assumed that to get a tax identification number you would first need to be recognized as a legal entity so you would need your local ALEI; this, somewhat surprising to some, is not the case. It is also important to note that a taxpayer registry is different from a voter registry. Your obligation to register to pay taxes is regardless of your legal status; Al Capone was made aware that even illegal businesses still need to pay their taxes as do illegal residents. In most countries, getting a voter registration number is much harder than a taxpayer number which is truly one of the simplest steps of setting up a business and today it is often done on-line in a matter of minutes.
International standard for formatting registry references
ISO 8000-115 is the international standard for formatting identifiers. The standard is very simple, based on the premise that all identifiers are created by someone and, if you know who the someone is, you can ask them what the identifier represents. The standard format requires that all identifiers contain a prefix that identifies the issuer of the identifier. The identifier needs to be registered so that it can be linked to the information that identifies the issuer1.
In 2019, the International Standards Organization (ISO) published ISO 8000-116 as the international standard for the application of ISO 8000 –115 in formatting ALEIs as globally unique identifiers. The standard defines how to create prefixes for jurisdictions that issue ALEIs. The ISO 8000-116 ALEI for a corporation formed under the jurisdiction of the State of California has the prefix “US-CA.BER:”. Adding a prefix to the local ALEI is like adding an international dialing code to a local telephone number. In the same way that adding a country code turns a local telephone number into an internationally unique number, ISO 8000-116 transforms local business numbers into globally unique business identifiers making it much easier to verify business names and dates of formation, critical in creating efficient supply chains and preventing corporate identity theft.
1 ECCMA manages SmartPrefix.org an ISO 8000-115 prefix registry.
The true power of registries
Unfortunately, registries themselves can be destroyed by accident or intentionally. A fire in Paris in May 1871 destroyed the entire Parisian civil registry and as a result legislation was passed in 1877 creating the French family record book to allow citizens to maintain an “authoritative copy” of their civil status records. Other countries have something like the French family record book.
It occurred to some that an easy way to implement two of the key tenets of the Manifesto of the Communist Party by Karl Marx lay in the destruction of registries. The abolition of private property could be achieved simply by destroying the land register and the abolition of individuality could be achieved by destroying vital records transforming allegiance from family to state.
Registries exist for many functions that we would not know how to do without: postal services have registries of all addresses to which they deliver mail, companies keep shareholder registries, clubs keep membership registries, and banks keep customer registries. The world today runs on registries. Registrars are the managers of our vital government registries; they maintain order and without them our lives would be much more difficult, so, the next time you raise a glass, celebrate the registrars.
Example of New Zealand registries
• COMPANIES REGISTER: Where you can search for and maintain companies incorporated or registered in New Zealand
• DISCLOSE REGISTER: Where you can search for or register financial products and managed investment schemes offered under the Financial Markets Conduct Act 2013
• FINANCIAL SERVICE PROVIDERS REGISTER: Where you can search for or register individuals, businesses and organisations that offer financial services in New Zealand (financial service providers or FSPs)
• PERSONAL PROPERTY SECURITIES REGISTER: Where you can search for and register security interests in personal property
• APPROVED OVERSEAS AUDITORS & ASSOCIATIONS OF ACCOUNTANTS: Overseas auditors and accounting bodies approved to do audits of organisations that aren’t issuers.
• AUDITORS: Auditors who are licensed and Audit firms that are registered under the Auditor Regulation Act 2011 to carry out Financial Markets Conduct Act audits (FMC audits)
• BUILDING SOCIETIES: Building societies incorporated under the Building Societies Act 1965
• CHARITABLE TRUSTS: Boards of charitable trusts incorporated under the Charitable Trusts Act 1957
• CONTRIBUTORY MORTGAGE BROKERS: Contributory Mortgage Brokers registered under the Securities Act (Contributory Mortgage) Regulations 1988
• CREDIT UNIONS: Credit unions incorporated under the Friendly Societies and Credit Unions Act 1982
• FRIENDLY SOCIETIES: Friendly societies registered under the Friendly Societies and Credit Unions Act 1982
• INCORPORATED SOCIETIES: Incorporated societies registered under the Incorporated Societies Act 1908
• INDUSTRIAL & PROVIDENT SOCIETIES: Industrial and provident societies established under the Industrial and Provident Societies Act 1908
• INSOLVENCY PRACTITIONERS: Insolvency practitioners licensed under the Insolvency Practitioners Regulation Act 2019
• LIMITED PARTNERSHIPS (NEW ZEALAND & OVERSEAS): Limited partnerships, including overseas limited partnerships, registered in New Zealand
• OVERSEAS ISSUERS: Historical information and documents about registered overseas issuers
• PARTICIPATORY SECURITIES: Historical information and documents about registered participatory securities
• REGISTERED UNIONS: Unions registered under the Employment Relations Act 2000
• RETIREMENT VILLAGES: Retirement villages that operate under the Retirement Villages Act 2003
• SUPERANNUATION SCHEMES: Historical information and documents for superannuation and KiwiSaver schemes registered under the Financial Markets Conduct Act 2013
• UNIT TRUSTS: Historical information and documents for unit trusts registered under the Unit Trusts Act 1960