Legal Entity Management

Getting control of legal compliance is a time-consuming task, but once you are in control it serves more benefits than just being compliant. Once compliance is under control, Legal is able to see which jurisdictions have been repeat offenders, to understand why and take steps to prevent recurrence. Beyond compliance, high quality entity management data can support a number of activities.

Entity rationalization

A well-organized structure allows operations and functions to focus closely on the needs of the business without the distraction of redundant entities that create inefficiencies. In larger organizations, the number of redundant legal entities can be overwhelming, and considerable resources devoted to maintaining them. Entity reduction can yield a real return on investment with cost reductions achieved in the areas of legal and regulatory, finance and treasury, accounting, operations, IT and HR.

Corporate reorganization

Making sure that the right entities own the right value drivers to provide greater overall value to the organization. In a demerger scenario, high quality data makes it easier to see which entities should be divested or retained.

Transactions

Smart compliance allows organizations to be transaction ready an opens up the possibility of other strategic options. Ready access to data in which the user can be confident can be used as part of an initial public offering (IPO) readiness exercise or for purposes of Earnings and Profits (E&P) studies for a transaction. This data allows the user both to understand the corporate structure today and to see how it has evolved.

Risk management

In addition to mitigating exposure to fines and the reputational and commercial risk of being non-compliant, proper entity management helps reduce risk in areas such as transfer pricing, where a successful challenge could result in profits being moved into higher taxed jurisdictions, trapping tax attributes into entities that cannot easily use them and increasing indirect taxes. Being able to show it is compliant also reduces the risk of an organization being the subject of regulatory investigation.

Cost saving

Getting entity management right provides a real return on investment. Cost savings come from the reduction of effort necessary to gather, file and publish the correct compliance data, from reducing the need to identify and correct filing mistakes, and from the elimination of fines and other penalties arising from missed deadlines and incorrect filings. Greater efficiency allows highly paid resources to focus on creating business value rather than fixing compliance mistakes.

Reporting

Better entity management improves the quality of reporting to the board. It enables better decision-making at both group and subsidiary levels because the directors are able to assess their options. This provides peace of mind to those charged with governance because they know and can demonstrate that they have been acting in an informed manner, and this contributes to robust risk management.

Benefits to other functions

Better entity management information allows the Legal function to act as a business partner that assists other functions and operations to be effective. For the Tax function, Legal is able to provide data including intragroup relationships which support management of the organization’s transfer pricing and information it uses for tax compliance and reporting. Tax is also able to see more easily whether the group structure is tax- efficient. Both Tax and Finance can use the data to benchmark the organization against its peers, and in response to US tax reform to see what cash repatriation strategies are practically possible without, for example – an intermediate holding company getting in the way. The most effective solution is a combined one, which includes all the entity-related information that both Tax and Legal require.

Delivering insight

From a business perspective, bad entity management results in bad data so it is imperative to have robust processes and controls to mitigate this risk. Making sure data is complete and accurate, and then implementing tooling to gather data centrally enables reporting and analytics. High quality entity management data can be easily shared with other stakeholders via user-friendly portals with in-built analytics and the tooling can be used for knowledge sharing and insights into entities, directors and shareholders and potentially contracts and licenses. Users can see at a glance what they need to do next with filing alerts and reminders for the next board meeting.