Global organizations have related legal entities all around the world. What might appear as an individual company can have thousands of subsidiaries to manage in jurisdictions all across the globe.
Why does a single global conglomerate manage so many subsidiaries? Well, there are probably as many reasons as there are subsidiaries, but here are a few:
- There can be tax advantages or other implications to incorporating subsidiary legal entities in all the different jurisdictions that a company may operate. For example, Global Co. operates in 36 countries around the world, rather than operating within one jurisdiction as Global Co. It might make more sense to incorporate a legal entity in each of the 36 jurisdictions for the purposes of retaining more revenue and paying less taxes.
- Incorporating separate legal entities in different jurisdictions for a global company can help reduce liability risks that may arise and limit those risks to only one of the subsidiaries.
- Keeping entities as separate legal bodies can make it easier for the larger parent company to sell the assets of, or the entire business related to, the subsidiary legal entity.
- Legal entities that have been acquired from arms-length transactions may simply be kept as separate legal entities over time for various reasons.
That’s just a few of the reasons that a parent company may keep so many different legal entities. In practice, there are many more potential reasons for doing so. What is important to recognize is that subsidiary management is far more common than you might think. There are countless companies managing tens, hundreds, or thousands of legal entities. As such, it is essential for the corporate secretary, chief governance officer, or general counsel and his or her staff to have the adequate and appropriate software for managing subsidiary legal entities. For global companies, having flexible software is even more critical due to the vast array of needs different jurisdictions may have.
Managing one legal entity can be complicated enough with the amount of annual governance and other related filings that need to be managed. Now, imagine spreading that over 1000+ entities. Talk about tricky!
With so much subsidiary management compliance to look forward to for the entities you are managing, there are many reasons to seek good subsidiary management software:
Reasons to use global subsidiary management software:
- Never miss a date again by using a compliance calendar
- Mitigate all kinds of risk across a corporate structure
- Centralize relevant information about your subsidiaries on one cloud-baesd platform that is accessible globally anytime
- Easily generate entity documents based on stored entity data
- Quickly see share structure and share ownership
- Easily find all directors, officers and other roles across all subsidiaries
Here’s what you need to know about managing subsidiaries for global entity management
1. Track everything with a compliance calendar
When you have tens, hundreds or thousands of subsidiaries to manage across multiple jurisdictions, you’re invariably going to manage hundreds if not thousands of compliance dates. For this reason it is incredibly important to use a compliance calendar to track all important dates, expiries and renewals.
A proper compliance calendar will help you make sure you never miss a deadline for any of your legal entities. Here are just some of the types of deadlines you’ll be tracking for your subsidiaries:
- Subsidiary annual government filings
- Subsidiary business name registration, expiry and renewal
- Subsidiary PPSA registrations and expiries
- Subsidiary asset registration and expiries including trademarks, patents and international registrations
- Subsidiary tax filings
If you’re managing more than 20-30 entities, you’ll also want to ensure you have a compliance calendar with the ability to filter out dates that aren’t relevant to you or your workflow. For example, some law firms manage tens of thousands of entities. Each of those entities might have 5-10 days that are being tracked every year. Furthermore, if you’re a major company with 1,000 entities under management, each of which have on average 5 dates that are being tracked in a given year, your calendar will have 5000 different dates. That’s 416 dates per month or about 14 per day. Yes, 14 compliance deadlines per day! Talk about being overwhelmed; you’ll undoubtedly want to make sure you’re not syncing all of these with Outlook.
To ensure you don’t get overwhelmed, make sure you have a tracker or compliance calendar that let’s you only see dates that are relevant to you. This might mean dates for particular subsidiaries that you are accountable for or for entities in your responsible jurisdictions
Even with just a few filters added, your compliance calendar can be clear of any dates that aren’t relevant to you. This is much better than seeing 14 reminders daily!
2. Use one system for a single source of truth
The larger your parent organization and the number of various subsidiaries you have under management, the harder it is to track all the relevant information across various subsidiaries. If you’re currently using an on-premises solution for keeping track of global entity subsidiaries, then your data is probably spread out across multiple offices throughout multiple jurisdictions. If you’re lucky enough to have some way of accessing this data, you’re probably used to using various VPNs and other server protocols just to get a handle of the many excel spreadsheets and documents spread across numerous document management systems.
If you want to supercharge your subsidiary management and take it to the next level, the most important first step is to consolidate and centralize all the records and data associated with the various subsidiaries into one single source of truth. You’ll no longer have to review multiple versions of the same data sets or ask various stakeholders and individuals to confirm information once everyone in the organization collectively knows that there is one canonical place for all entity and subsidiary information to live.
With a single streamlined approach, you’ll stay ahead of the game, even with constantly changing and evolving corporate structures. Don’t let information management get in the way of what is truly important – the ability to have the information to ensure management can make smart decisions.
3. Reduce errors and mitigate risk in subsidiary management
Even the smallest of mistakes can have the biggest of impacts on a global corporation. Whether it be a single date that lapses or a corporate resolution signed by the wrong party, keeping all entity information in one centralized place has the additional benefit of reducing errors and mitigating risk.
Consider, for example, all of the corporate resolutions and by-laws that need to be passed across all entities of a subsidiary. You need to be extra certain that you correctly know who the authorized signatories are. Each time you manually enter into this process, you are opening up another degree of freedom for unintended mistakes and errors. With a single subsidiary management solution, you can reduce the probability of these sorts of mistakes and thereby reduce the risks that come from them.
Therefore, if you’re managing subsidiaries, ensure you have a global subsidiary management software in place to hold and track all of the important data across all parent and subsidiary organizations. This single source of truth is not just convenient, it can potentially save you from massive risk and error.
What’s next?
How do you best manage legal entities across a parent organization and its subsidiaries? It all starts by making sure you use specialized software to track and manage compliance dates across all entities. Next, you’ll want to ensure you have all the data for all subsidiaries in the same system so you know you have one single source of truth across the organization. Once you have everything centralized, you’ll reduce your exposure to risk and mitigate losses by automating routine tasks and reducing the probability of human error. Use legal entity management software that works for you. With these steps you will find it much easier to manage your subsidiaries across an organization.
Manage your organizations global subsidiaries with MinuteBox.com
