Maintaining secure and accurate corporate entity data underscores the foundation of an organization. Legal teams are tasked with managing entity data to ensure regulatory compliance with jurisdictional laws.
Unfortunately, managing all this data becomes increasingly challenging, time consuming, and resource intensive. According to a joint study by EY Law and the Harvard Law School Center, 89% of organizations struggle to maintain diligent corporate records.
Why the struggle? Let’s dig into that.
Legal teams have limited resources to manage global entities
In a survey of 427 legal departments, the findings show a median of six experts on an in-house legal team. Even more telling is that the number of experts considered part of the legal operations division is approximately 5% of the total staff.
Think of legal operations in a similar role to a revenue operations team. These are the people who provide the data, the resources, and the structure to help the professionals who will go out and sell the value of the business to a potential buyer.
In revenue operations, they provide salespeople with leads to go and sell the business. In legal operations, these are the paralegals or clerks that provide trained lawyers with all the information they need to service clients. In the case of in-house corporate counsel, the client is the business entity itself. It’s a vital role that, in the legal community, is sorely lacking in bandwidth, headcount, and resources.
Legal experts must manage global entities and subsidiaries
The strain on legal departments grows as businesses scale to global levels. At this stage, securing data and maintaining compliance for the principal corporate entity are only one aspect of a legal department’s responsibilities.
The greater challenge lies with managing subsidiary data and those business records. As corporations become global businesses, they often establish subsidiary branches in different jurisdictions. This means creating new subsidiary business names, bank accounts, tax IDs, office locations, executive officers, employees, etc.
Among the main reasons why businesses create new subsidiaries include:
Protecting corporate assets from subsidiary liabilities
Enforcing compliance in international jurisdictions
Receive tax advantages that can’t be claimed by parent companies
Improve mergers and acquisitions with newly acquired companies
Coordinating financial disbursements to support overseas operations
Providing another arm of guarantor security if the corporation requires credit financing
Subsidiary management best practices
Given that in-house counsel is a limited team with global responsibilities, it’s best to provide your legal department with subsidiary management best practices. This will help teams use their resources effectively and avoid the frictions or pitfalls that can arise from uncoordinated subsidiary management.
Create a subsidiary governance framework
When companies reach the size of a global corporation with multiple subsidiaries, it only makes sense to establish a subsidiary governance structure. By creating a subsidiary management playbook, your legal team can use the guidelines to assist with things like:
Reporting controls between subsidiaries and the parent corporation
Processes to create boards of directors and subsidiary executive committees
Systems to establish powers of attorney for subsidiaries
Establish detailed organizational charts for the subsidiary
Organization charts are an excellent resource to structure and organize your subsidiaries. These charts outline the hierarchical structure of the business, providing detailed records of which executives are responsible for specific operations.
These charts can even include a connective thread to the parent entity. Your legal team can refer to the charts and contact the executives at the top of the hierarchy whenever legal or fiduciary matters overlap between the parent entity and the subsidiary.
Use subsidiary management software to centralize all business records
Finally, the best resource for efficient subsidiary management is an intuitive platform designed to modernize minute book record keeping and maintain corporate compliance.
Subsidiary management platforms automate many of the clerical tasks and responsibilities involved with the compliance process. They also include advanced security measures that store and safeguard important business records, ensuring all data security protocols specified by jurisdictional laws and by-laws are maintained.
Most importantly, subsidiary management platforms help in-house legal teams save valuable working time on compliance protocols. Given that the average in-house legal team consists of only six people, a platform that simplifies and streamlines the subsidiary management process makes it far easier and more efficient for legal teams to complete their responsibilities. Providing these resources will go a long way toward helping your legal team avoid feelings of burnout.