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Legal entity rationalisation
Achieving cost savings or risk reduction by simplifying the legal structure
Other than for making the legal entity chart easier to read, or even possible to print, why would companies try to simplify their legal entity structure? For most companies, the answer comes down to cost savings or risk reduction related, for example, to changes in the tax environment or transfer pricing, or some combination of both.
One unintended consequence of Mergers & Acquisitions activity in recent years has been unwieldy legal entity structures. In many large companies, the number of redundant legal entities can in fact be overwhelming. Considerable internal resources (and costs) are potentially devoted to maintaining these excess entities. Simplifying the legal entity structure can, however, be a challenging undertaking in itself. While there are obvious costs and disruption associated with entity simplification, there can also be significant benefits.
How Deloitte can help
Our team of legal, operational, financial and tax experts can help achieve these benefits more rapidly and in measurably larger amounts by deploying an approach that suits the client organisation best.
Our seasoned team works in a hands-on manner and at close quarters with the stakeholders to:
- evaluate the current structure in terms of cost and value add
- align the legal entity structure with the business model
- assess the risk inherent in the current structure (e.g. tax and legal)
- work out a suitable transfer pricing strategy
- implement the plan without materially affecting BAU