Why the Secrecy? Privately Held Manufacturers Can Benefit from Revealing More Information

The following first appeared on Robinson+Cole’s Manufacturing Law Blog. It is reposted here with permission.

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Stop me if you have seen this before. You visit the website of a U.S. privately held manufacturer, and you click on the “About Us” page (if one exists) to find only generic information that could describe any manufacturing business in the country.

There often is no listing of who runs the business—let alone who owns it—and sometimes, there is no information as to how big the facility is or how many employees work there.

Often, there is no information as to when the business was founded or its history. 

Contrast that with many international privately held businesses—including in Europe.

The websites often have a listing of the executive team, ownership information, employee headcount, and most importantly the top line revenue of the business (and perhaps even its profitability). 

Why the difference? Why are international businesses more transparent? 

Disclosure Rules

The answer to these questions is not readily obvious, but at least in part, the “secrecy” that U.S. businesses have as to ownership and/or revenue information is baked into U.S. corporate law.

Up until the time of the passage of the Corporate Transparency Act, lawyers would always talk about the fact that forming in Delaware (as an example) was straightforward and that much of the company’s underlying information would not need to be disclosed.

The “secrecy” that U.S. businesses have as to ownership and/or revenue information is baked into U.S. corporate law.

Often, our international clients are surprised by this, as the disclosure rules outside the U.S. can be extreme, including the disclosure of passports as an example.

I have represented a lot of privately held manufacturers and I understand why certain companies do not want to disclose information.

However, I would maintain that U.S. privately held businesses should consider more disclosure—not less—for a few reasons.

Transparency Helps

First, in an era where manufacturers are desperate to find employees, transparency can only help.

Knowing who owns the company, who runs it, how big it is, how many employees work there, and the history (i.e., stability) of the organization can be an effective recruiting tool.

Manufacturers should think about whether maintaining secrecy of all information is actually helping them or just serving as a barrier for growth.

Second, this information can also help potential customers as they conduct diligence on whether to do business with you.

There are other reasons as well.

At the very least, U.S. privately held manufacturers should think about whether maintaining secrecy of all information is actually helping them in any way or just serving as a barrier for growth.

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