Investigations

A Freedom of Information request by Strident has revealed that Creative Scotland (CS) funded Scottish Review of Books Limited (SRB) as a ‘not-for-profit’ company limited by guarantee when it is actually a company limited by shares.

SNP MSP failed to declare interest

SRB lists a former SNP MSP as a shareholder, despite him not having declared his interest as required under the MSP Act 2006.

SRB ticked the box that said it was a company limited by shares. However, it then claimed that it was run on a ‘not-for-profit basis’.

SRB’s articles of association do not restrict dividend payments, and, were it to be liquidated, its shareholders would receive the net assets. It may not make much profit, but that does not make it a not-for-profit company. CS should have challenged the assertion; instead, it was taken in by it and repeated it when presenting the application to its funding panel.

Most would consider a ‘not-for-profit’ more attractive for an arts body to fund.

Strident undertook its own investigation after members of CS’s senior leadership team failed to act on information passed to them.

PSC is director of Creative Scotland’s most-funded publisher

Strident’s investigation has also revealed that SRB’s sole Person of Significant Control (PSC) is a director of Creative Scotland’s most-funded publisher, Birlinn. In its assessments, CS neither recognised the clear conflict of interest nor attempted to address it.

Failure to spot discrepancy in share capital

Further, CS funded SRB despite the company’s filings at Companies House showing a £20,000 discrepancy in statements of its share capital. SRB’s Confirmation Statements claim £30,000 paid-up share capital, yet its accounts show only £10,000 called-up share capital. (Paid-up share capital cannot be greater than called-up share capital – the former is a subset of the latter.)

Failure to establish who owns SRB

CS is unable to say with certainty who SRB’s shareholders are or what percentage they hold. Filings reveal that an allotment of shares was made in 2016, yet that allotment is not reflected in any subsequent confirmation statement. Who owns the allotted shares?

SRB’s confirmation statements show that two shareholders each hold more than 25% of its shares/ That would make both automatically notifiable to Companies House as Persons of Significant Control (PSC). Yet neither has been notified as such. The only notified PSC is SRB’s Birlinn-director Chair.

This raises the possibility that ownership of SRB is completely different from that shown in the Companies House filings. It could mean that the Chair has an unregistered shareholding that has diluted the other shareholders below 25%, negating the need for them to be declared PSCs. We are not saying that it does mean that, but it one possible interpretation. The point is that CS does not know, yet it approved funding to the company regardless.

The company that acts as SRB’s company secretary has filed dormant accounts since 2016.

Failure to spot blatant conflicts of interest

SRB’s own website reveals that the majority of its board is conflicted through financial relationships with CS’s most-funded publisher Birlinn (£0.4 million via 49 grants). That includes SRB’s Chair and sole PSC (who acts as Birlinn’s marketing director through her own company), its editor and its online editor (a Birlinn employee).

That conflict of interest is apparent in SRB’s publications. It has heavily promoted its editor’s Birlinn-published book as well as the series of Birlinn-published Muriel Spark republications for which he was series editor (and for which Birlinn separately received £45,000 funding from CS.

CS did not require SRB to draw up an editorial policy and process to ensure Birlinn did not unduly influence its output. The conflicts of interest mean that it is, in reality, not a review but a promotional publication for Birlinn masquerading as a review. Even if that were not the case, the multiple conflicts of interest mean that it will be viewed that way.

What Strident has called for

Strident has called on Creative Scotland to launch a full investigation into its funding of Scottish Review of Books Limited.

It has also called for a clear statement from Creative Scotland of its approach to conflict of interest.