Who is Shein’s Human Owner? Questions Threaten IPO Ambitions

“Another day, another failure by Companies House to spot a failure by a company to declare who controls it,” Dan Neidle, founder of Tax Policy Associates, wrote on X on Wednesday. “This time, fashion giant Shein.”

Neidle was referring to the government agency that maintains a register of companies in the United Kingdom. By failing to declare its ultimate beneficial owner, the Chinese-founded e-tail Goliath had flunked the corporate equivalent of the “Are you a human?” captcha test.

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“According to Companies House, they’re controlled by Roadget Business Pte. Ltd, a Singapore company,” he said. “But the rules don’t permit that. A company has to declare the actual human who owns it.”

Neidle wouldn’t say how he came across the issue, which he shared with the Guardian this week, beyond the fact that his think tank is working on ways to “systemically identify rule-breaking companies,” with this an “early result.” He said that firms that do not provide accurate information about their so-called person with significant control, or PSC, are committing a criminal offense.

“We are grateful that this has been brought to our attention,” a Shein spokesperson said. “Unfortunately, this error was not identified in the company’s registration process. We are currently working to rectify the problem.”

But Neidle told Sourcing Journal that Shein has refused to tell him the identity of its PSC, and that if an amendment isn’t issued soon, it could indicate a deliberate effort to obfuscate.

Founded by Sky (previously Chris) Xu in 2012, the $66 billion purveyor of impossibly cheap fashion, electronics, kitchen goods and just about everything else has bedeviled those seeking to hold it to account, including lawmakers, with its limited supply chain disclosures. In its recently published Fashion Accountability Report, sustainability advocacy group Remake awarded Shein a scant 6 out of a possible 150 points for, among other missteps, the absence of publicly available manufacturing restricted substance and supplier lists.

This isn’t the first time the Temu nemesis has elided necessary information in Britain. In 2021, Reuters reported that Shein not only failed to provide public disclosures about working conditions along its supply chain as legally required in the United Kingdom, but that it also falsely stated on its website that conditions at its suppliers were certified by international labor standards bodies. These were later corrected, albeit with what one labor campaigner described as a “vagueness” that demonstrates how “toothless” the 2015 Modern Slavery Act is in its current form.

“Shein is well-known not just for churning out cheap clothing at an alarming rate but also for its almost complete disregard for ethics and sustainability,” said Dominique Muller, policy director at the Bristol-based Labour Behind the Label. “Its supply chain is opaque and few details of its actual policies and practices are outlined in its reports. Its modern slavery statement is vague and refers to ill-defined goals. For example, it talks of a ‘fair’ wage without detailing what that is or how long workers have to work to obtain it. It states it is against forced overtime, without seeing the irony in stating it is against something that is illegal.”

The Missguided owner’s attempts to secure an IPO, whether in New York or, as reports have it, in London, could be tripped up by its reputation for holding things back. If there’s one issue both sides of the Congressional aisle can agree on, it’s that America’s second-most downloaded shopping app cannot be allowed to rush headlong into a public bid without making additional disclosures about its business, including close ties to China that could put it at risk of sourcing goods made by persecuted Muslim minorities. Jeremy Hunt, Britain’s chancellor of the Exchequer, has reportedly held talks with Shein executive chairman Donald Tang to persuade the company to list in the United Kingdom. (A representative from Hunt’s office said that the government does not comment on individual companies and that “it is for individual firms to decide where to list.”)

The Gen Z favorite is likely to want to keep its options open, said Neil Saunders, managing director of retail at GlobalData, a data analytics company.

“I think New York is still the first preference for Shein,” he told Sourcing Journal. “The company likes the strength of the market and the positive American sentiment around technology companies like Amazon. Shein believes this will be helpful in securing a good IPO price.”

At the same time, Shein has “a lot of concerns about listing in the U.S., including SEC regulations and scrutiny, and potential political probes into its business,” Saunders added. “That is why a London listing is being kept in reserve.”

Muller is dismayed by Hunt’s alleged wooing, saying that it “beggars belief the chancellor is actively seeking out one of the most dangerously opaque and murky supply chains in the whole to list in the U.K.” She said that if money is to be made, then the United Kingdom is “open for business without reflection on sustainability, human rights compliance or transparency.”

Neighboring France has its eye on Shein, albeit for a different reason. Following a proposal by one of its members of parliament that ultra-fast fashion brands like Shein should be dealt an overproduction penalty of 5 euros ($5.45) per item, a second bill suggested this week that tax of 10 euros ($10.90) per item or up to to 50 percent of its selling price would be more appropriate.

On Monday, French environment minister Christophe Béchu revealed that the government would back legislation to “financially penalize fast fashion,” including banning its advertising and limiting the activity of influencers on social media networks. Ultra-fast fashion brands would also have to display on their sites an “awareness message” about the environmental impact of their clothing.

While a Shein spokesperson said that the proposed law has a “laudable and necessary objective,” it targets the activity of a “few successful players” without any impact study or assessment of its real environmental benefits and the effects on French consumers.

“It would have a direct impact on the purchasing power of millions of French consumers,” the spokesperson said. “Those who would be penalized are the very consumers who do not have the capacity in the current inflationary climate to spend on more expensive products.”

But the goal of the legislation is to make sustainable fashion more accessible to consumers and make existing fashion more sustainable, Béchu wrote on X.

“Ultra-fast fashion is an ecological disaster,” he said. “Clothes are poorly made, widely purchased, rarely worn and quickly thrown away.”

On Wednesday, Shein was name-checked during the launch of the Coalition to Close the De Minimis Loophole, an assemblage of lawmakers, industry groups and other stakeholders who seek to reform a so-called “loophole” in U.S. law that allows packages valued at less than $800 to avoid taxes, fees or closer routine inspection. Many of the marketplace’s critics say that the exemption gives it a competitive edge that is part of the secret of its meteoric success.

“The de minimis loophole means that our own trade laws are granting bad actors like Shein and Temu an outrageous advantage over American manufacturers,” Scott Paul, president of the Alliance for American Manufacturing, said in a statement. “These Chinese companies have built billion-dollar businesses by exploiting de minimis, hooking American consumers on below-bargain-basement prices and supercharging a retail race to the bottom.”

Shein’s Tang has previously called for change as well. Writing in a letter to the American Apparel & Footwear Association in July, he said that “responsible” reform would allow consumers to make everyday online purchases with “more information, confidence and trust.”

“The de minimis exemption needs a complete makeover to create a level playing field for all retailers,” Tang said. “At the same time, American consumers deserve to know that the products they purchase are authentic and ethically produced. We believe de minimis reform can and should achieve both.”

It’s a sentiment with which Paul agrees. “The de minimis provision invites importers to cheat the system and to exploit their workers,” he said. “The United States must close this loophole now.”

For now, Neidle from Tax Policy Associates is stuck on whether Shein has a human owner.

“Given the history, and that Shein haven’t commented when I asked who their PSC is, it’s looking like it might be intentional secrecy rather [than] an accident,” he said. “But who knows?’