Revealed: Nearly a quarter of BrewDog's shares held by tax haven firms, with former Vote Leave director among investors

It has enjoyed a meteoric rise thanks in large part to its self-proclaimed punk ethos, positioning itself as a brash upstart with a disregard for convention.

But The Scotsman can reveal that nearly a quarter of BrewDog’s shares are owned by obscure partnerships based in one of the world’s most notorious tax havens, with a pro-Brexit Conservative donor who served as the chair of Vote Leave’s finance committee among its most prominent investors.

The drinks firm has been engulfed in criticism from scores of former employees over the past week, with allegations of a “toxic attitude” among management and a “feeling of fear” among staff.

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With the firm experiencing a backlash after its meteoric rise, questions surrounding its workplace culture and ethos are mounting. The economic impact of coronavirus has also seen it obtain a £25 million loan via the UK Government’s Covid Business Interruption Loan scheme.

The company’s rapid ascent has been built in large part on its so-called ‘equity for punks’ crowdfunding initiatives, which have marshalled an army of more than 145,000 small shareholders while building its profile.

Its most recent prospectus quotes from the famous Apple commercial narrated by Steve Jobs to pay tribute to “the misfits, the rebels, the troublemakers”, and those who would be classed as “round pegs in square holes”.

However, a sizeable chunk of the firm is owned by parties which could not be further removed from its punk image.

Some 23.25 per cent of the company’s total issued share capital is held by two exempted limited partnerships based in the Cayman Islands.

BrewDog co-founders James Watt and Martin Dickie.BrewDog co-founders James Watt and Martin Dickie.
BrewDog co-founders James Watt and Martin Dickie.

The entities, TSG7 A AIV II (Cayman) LP, and TSG7 A Lassies and Laddies (Cayman) LP, hold a total of 891,383 ordinary A shares in Brewdog PLC.

Between then, they also hold a further 16,160,949 preferred C shares in the company, confirmation statements filed with Companies House show.

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Unlike the other holdings in the company, the shares held by the Cayman entities have what is known as a ‘liquidation preference’, meaning that in the event of the firm’s liquidation, they will get their money back first.

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The partnerships are controlled by TSG Consumer Partners, a US private equity firm with more than £6.4 billion in assets.

The recent controversies surrounding BrewDog have allowed TSG to gain even greater influence over the company. Last week, its managing director, Blythe Jack, was parachuted in as the inaugural chair of BrewDog’s board.

Alex Cobham, chief executive of the Tax Justice Network, the advocacy group that campaigns for a fairer tax system, said: “This is a disappointing, but sadly common story – companies whose approach to tax havens is entirely at odds with their projected image.

“Cayman ranks worst in the world in our Financial Secrecy Index, and second worst on the Corporate Tax Haven Index. It is a jurisdiction overwhelmingly dedicated to facilitating anonymous ownership, profit shifting and the avoidance of tax on capital gains that would otherwise arise in the places where the real business happens.

“Cayman’s success rests on the continuing political support of the UK Government, which refuses to require improvements despite having the power to impose these, nor to support the island’s authorities in developing a less pernicious business model.”

He added: “Having major investors using Cayman as a conduit is certainly anti-social, but it’s about as punk as croquet.”

Asked how it could reconcile its company ethos with the fact such a large proportion of its stock was held by the Cayman entities, a spokeswoman for BrewDog said it “can only comment about BrewDog’s own tax obligations and activity”.

It is not only offshore firms who are among the biggest individual shareholders in the Aberdeenshire firm.

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Some 7,142 class A shares are held by Jon Moynihan, a long-time Conservative donor who gave £100,000 to the party in the run-up to the 2019 general election.

The pro-Brexit venture capitalist and private investor is perhaps best known for having served as chair of Vote Leave’s finance committee, as well as a member of its board.

He also chairs the executive board of the Initiative for Free Trade, a right-wing think tank, and is a member of the advisory council of the Free Speech Union, the pressure group founded by Toby Young.

Ironically, BrewDog’s latest accounts note the negotiations around Brexit had created “uncertainty for certain trading relationships”, due to its international scope.

The firm’s decision to buy a brewery in Berlin, so as to produce and distribute its drinks within the EU, was largely driven by Brexit. At the time, Watt warned the process would cause “severe long-term damage” to the UK economy.

Asked about Moynihan, the BrewDog spokeswoman said the company had hundreds of thousands of investors, and “would never judge any of them by their personal political beliefs”.

She added: “They are free to believe in what they like. We’ve made our views clear on these issues in the past, but we’re not about to exclude everyone who doesn’t agree with everything we say.”

The controversy surrounding BrewDog’s company culture blew up last week with the publication of an open letter from 61 former employees under the banner, ‘Punks with Purpose’.

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They claimed a “significant number” of ex-employees had suffered mental illness as a result of working at the firm, and said it was built around a “cult of personality”, name-checking Watt and his co-founder Martin Dickie.

Punks with Purpose said it has since been “inundated” with people wanting to tell their stories, with more than 300 signatories to the open letter.

In his response to the letter, Watt said that BrewDog would not “leave things at an apology” and promised to introduce a “better culture” that would “set an example for our industry”.

The company spokeswoman said it had met with “multiple experts in workplace culture” and intends to appoint a third party in the coming days to look at the firm’s culture and HR practices.

Moynihan could not be reached for comment.

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