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Perspectives

An inside look at legal entity management practices

Highlighting governance challenges for legal entities

The Association of Corporate Counsel (ACC), in collaboration with Deloitte Tax LLP, have conducted an in-depth study of 520 organizations. The aim of An Inside Look at Legal Entity Management Practices is to gain a better understanding of current corporate legal entity management (LEM) structures, practices, and expectations.

Study objectives

The demand to satisfy obligations across multiple jurisdictions and meet the new standards of transparency on a global scale is rising. This is causing a reevaluation of operating models and legal entity governance structures. The purpose of this survey report is to improve understanding of existing team structures, procedures, and practices that organizations have in place to manage complex compliance and regulatory obligations.

Key survey findings

The survey results make clear that most respondents face extensive legal entity management (LEM) challenges, reinforcing the need to better understand LEM leading practices. Five key findings:

Twenty-two percent of departments expect an increase in LEM staff over the next year. In addition, 39 percent reported an increase in the LEM budget over the past year. About half of departments are currently satisfied with company leadership being sufficiently attuned to the organization’s subsidiary management processes, indicating there is still room for improvement.

Forty percent of departments do not have a compliance calendar to track corporate entities records, and 56 percent do not conduct any internal audits or regular monitoring for LEM practices and procedures. The silver lining is that three in four participants are at least somewhat confident in their organization’s ability to stay in compliance with regulatory changes.

Sixty percent of participants report using an electronic database to track corporate records, but just 41 percent use a specific legal entity management database. Seventy-three percent of participants, however, are dissatisfied or neutral with the current technology solutions that they have in place. Forty percent list the lack of technology as one of the main challenges in successfully handling LEM in their organization.

The main challenge faced by LEM teams is competing priorities within the organization, according to 71 percent of participants. The lack of bandwidth (49 percent) is also listed as one of the main hurdles for the LEM function. Forty percent of participants struggle with inconsistent processes, and 31 percent indicate that their LEM processes are antiquated.

Companies that implement leading LEM practices deliver better business outcomes. Ninety percent of LEM leaders are at least somewhat confident to stay in compliance with regulators, compared to just 64 percent of organizations with the fewest LEM practices in place. Similarly, 68 percent of LEM leaders are satisfied with business stakeholders being attuned to subsidiary management processes compared to just 31 percent of those in the bottom tier.

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Want to explore what all this LEM survey uncovered?

Learn more about Deloitte’s Legal Entity Management Services

An outdated and inefficient legal entity management process may create needless costs and risks, including potential instances of noncompliance. Deloitte's Legal Entity Management* (LEM) services can provide increased transparency into legal entity governance and reduce cost, all in an effort to make your legal ecosystem more efficient and effective. We are powered by an integrated workflow, data, and document management technology platform providing high visibility into engagement management workflows and real-time analytics.

*The Deloitte US firms do not practice law or provide legal advice

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