The Best Ways to Utilize Legal Entity Management

Utilize Legal Entity Management

Over time, it’s usual for businesses to become more and more complex in structure, which in turn, throws up many new management challenges. Regulatory compliance and business goals must be met, while risk must be appropriately managed.

Businesses need to be aware of problems which may occur as a result of a financial crisis. For example, increased regulatory burden, and a requirement for tighter data security in the face of potential cyber-attacks.

Corporation tax must be considered. Its value tends to vary around the world; however, companies might be able to take advantage of incentives such as creating their own subsidiaries in areas where tax is lower.

Setting up effective and efficient legal entity management can be time-consuming, but it’s worth the investment. Future mistakes are less likely to happen and business goals can usually be better achieved.

 

The Five Most Important Things to Consider for Entity Management

1. Record-Keeping, Regulatory Filings and Centralised Compliance 

Decentralisation is often associated with disorganisation and missing regulatory filing deadlines. It’s also associated with shoddy record-keeping and compliance issues. These types of problems will only compromise businesses growth and future health. Compliance information needs to be stored in one central place so that all outstanding tasks are easier to manage, and all tools that can be used to execute different business functions are readily available.

 

2. Supporting Directors in their Tasks

Directors need to have the right skill set and areas of expertise to help the business remain competitive and avoid potential conflicts of interest. However, because different standards are applied to different jurisdictions for entities, this can complicate things. For example, conflicts of interest could occur. So, directors will always need to exercise independent judgement and use their duty of care appropriately. When entities are created, they will need to satisfy all regulations regarding director independence, or restrictions in the number of possible directorships. Director training may be required surrounding governance, responsibilities and conflict. Directors also need to fulfil ongoing communications with staff, shareholders and other directors so they can achieve their ongoing obligations.

 

3. Creation of a Subsidiary Governance Framework

Considering that many organisations have multiple subsidiaries worldwide, a framework needs to exist for all users within an organisation, so that information can be accessed no matter where they are based. If users need access to specific information, this should be authorised quickly, but the access level should be correctly set. When new systems and processes are being established, it’s essential to set clear goals while communicating them to all staff and stakeholders. All supporting documentation should also be gathered at this point. Similarly, all board members and corporate secretaries must be committed to new systems and processes. Training is also essential.

 

4. Using Technology to Enable Better Compliance

While the right kind of technology can help make things easier, particularly with regards to subsidiary management, it can result in chaos if it’s not used correctly. If you’re in the process of swapping over from your current entity management platform, don’t just sign up with a vendor straight away without first considering all your ‘wants’ and ‘needs’.

If you’re not entirely sure what you’re looking for, an excellent place to start is a system that can meet all your governance, compliance and record-keeping needs so you can meet various different entities. Also consider integration, so the technology you choose works well with your existing systems. You’ll also need to have appropriate information about installation, upgrades and ongoing support, to help minimise any kind of risk to your business. The vendor should also be up to date with compliance and regulatory changes and don’t forget to consider user experience as well. Sit down with important stakeholders to discuss functionality. Specifically, what features you must have in the software, and what would be nice to have. Once you start looking at vendors, prioritise ones who are willing to get to know your organisation, your goals and your needs.

 

5. Empowering the Corporate Secretary

The corporate secretary lies at the heart of governance, compliance and corporate management. Traditionally seen as a record-keeping role, it is becoming much more strategic, with a need to help directors with their extra tasks, plus ongoing training and support of other members of the team. The role is becoming increasingly varied, completing tasks such as managing agendas, data reporting, presenting and follow up, assisting with stakeholder communications and board development, helping the chairman and assisting with different governance matters. Proactive secretaries are an asset to any organisation, helping them stay ahead of their competition and ensuring they can deal with new compliance problems and regulations as they occur.

Parting Words on Legal Entity Management

The process of managing different entities within an organisation can be challenging. However, legal entity management can be worth the investment, particularly for complex organisations, as it enables them to run more effectively. When a company adopts processes and best practices for entity management, they are more likely to enjoy continued success.