Entity management: making headspace while controlling headcount
Companies want their brightest legal minds to play a more strategic role in the businesses, and recent events have proved that they can guide and refine corporate action right across the board. GCs have been trying for some time to bring more of the most complex legal problems – like litigation – back in house. But all of this is often being played out against a background of tightening budgets and skills shortages.
So how can GCs in cross-border businesses rise to this challenge while controlling costs, to create more headspace for the most pressing challenges while tightly controlling the actual number of heads?
The answer for many lies in how they choose to tackle the entity management challenge because the pre-pandemic concerns of GCs haven’t simply melted away.
Cross-border regulatory complexity. The relentless flow of tougher rules and stricter enforcement. The pressure on corporations to be more transparent, responsible and socially minded. The growing threat of fines, reputational damage or worse. These considerations still give GCs sleepless nights.
The pressure to be more transparent is ramping up everywhere, and with greater transparency comes greater complexity, as the administrative burden of reporting weighs heavier than ever on multinational organisations. Economic substance rules are beginning to rear their heads in jurisdictions once thought of as ‘tax havens’. Ultimate beneficial ownership (UBO) registers, born in the EU, are now spreading across the globe, with local versions frequently including their own complications. The US Corporate Transparency Act – the biggest change to US anti-money laundering regulations in 20 years – soon will also enter into force. Meanwhile, regulators across the globe are being given sharper teeth.
Dotting the I’s and crossing the T’s on the legal and regulatory status of every single subsidiary in each jurisdiction – and doing it thoroughly, in real-time – is a huge workload for any in-house legal team. Inevitably it drains energy and creativity that could be devoted to more strategic and complex matters.
In-house legal teams simply lack the local knowledge across sufficiently large numbers of jurisdictions to confidently navigate each legal and regulatory landscape, along with their conflicts and peculiarities. And nor is effective entity management purely a matter of achieving legal compliance. Complex accounting, tax and HR threads can take many legal teams far beyond their comfort zone.
When corporates try to close the skills gap with a patchwork of local service providers they often struggle to refine all those competing voices and perspectives into the transparency, certainty and confidence senior management needs. Meanwhile, dealing with the duplications, overlaps and inconsistencies – all inevitable in the circumstances – drains executive resources and drives up costs.
Whichever approach is taken, GCs in cross-border businesses frequently know that their lawyers already spend too much time on supposedly ‘routine’ entity management activities. Much worse, the value they add is not value for money – their boards still don’t really have the degree of global tax and corporate governance risk assurance they need.
Outsourcing cross-border entity management processes to a global entity management specialist can unclog these complications at a stroke. A global approach to local compliance delivers the urgently needed efficiency bump by simultaneously tackling the three critical dimensions of the problem and solving the puzzle holistically, combining:
- an insider’s understanding of each jurisdiction’s idiosyncrasies
- a real-time grip on the powerful and restless forces of global and supra-national regulatory change
- a multi-disciplinary skill set that brings together legal, accounting, tax and HR expertise.
Using a specialist resource with multi-jurisdictional reach means you can get the framework right from the start – whether that’s a start-up incorporation or a one-off event like an acquisition or a closure – and then deliver ongoing entity management and regulatory compliance in a timely, consistent and cost-effective way.
In-house legal talent is freed up at the centre and margins, enabling the business to better tackle the complex problems from within, as well as to confront strategic challenges such as the insourcing of high-cost legal services like complex litigation.
By replacing a patchwork of small providers with consistent central management of expert local teams, a single global provider can deliver the holy grail of legal and regulatory compliance: greater consistency, reliability, punctuality, transparency and oversight; all at lower total cost; delivered across any number of jurisdictions.
The entity management problem can seem like an inevitable consequence of the typical corporate growth model; a small number of large bases are created in familiar ‘home culture’ locations, but they must drag behind them a long and hard-to-control tail of smaller offices in complex jurisdictions. Then there’s the accounting, tax and HR challenges all woven into each jurisdiction’s complex and unique fabric of corporate regulation and compliance.
It is no surprise that cross-border entity management often feels like a very raw and persistent source of systemic management uncertainty. But it doesn’t have to be like that.
The support of a global strategic partner simplifies and soothes entity management and compliance challenges, practically isolating them from the company’s global risk algorithm, solving stubborn skills shortages permanently, and freeing expensive in-house expertise to deal with more pressing matters. The result is a stable platform of legal and regulatory compliance from which every business challenge becomes more manageable.
TMF Group is a leader in Global Entity Management, with a presence in 85 jurisdictions and 9,100 experts spread around the globe. Wherever you operate, our professionals speak the local language, have the local knowledge, know the local business culture and can help you to navigate any compliance matters.
TMF Group also provides a full suite of accounting and tax, and HR and payroll services, to help keep your entity in good standing throughout its lifecycle - from incorporation to dissolution. This makes TMF Group the ideal one-stop-shop for any organisation operating and growing internationally.
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