Working with multiple entities brings a huge amount of information to the legal operations team and the general counsel for handling. Start introducing global subsidiary management to the process, and those in charge of governance and compliance can find themselves walking through a minefield of regulation and data requirements.
To add to the challenge, this burden increases as international jurisdictions are introduced to the process of entity governance, and as new entities are set up and require their own local board management processes. Global subsidiary management requires a strong and robust subsidiary management plan, one that is built on an international base with long-term strategic thinking.
As entities and group structures become more complex, it’s easy to lose sight of global subsidiary management, of how to keep governance strong and robust. This is why many legal operations and general counsel teams start to introduce technology platforms to the governance process: These platforms can help to create a central record, to provide easier access to entity data from any location, and to ensure that board and governance operations run as efficiently and as smoothly as possible.
Before we look at how technology can build better global subsidiary management, let’s just remind ourselves of some of the challenges of international entity management.
The Challenges of Global Subsidiary Management
An organization might set up a new entity or subsidiary in a market for many reasons – they might want to test the waters before jumping head-first into a new market, they might want to create a legal barrier between the subsidiary and the parent company, or local regulation may require a separation between the local and parent board operations. For these reasons, and many more, international subsidiaries can be very attractive.
Yet, they do bring their own challenges. Not only do the entity managers need to consider the local regulations and requirements, which could differ wildly from HQ or be nuanced enough to create a headache, but they must also consider the culture in which that entity is operating. Some jurisdictions could be legally against bribes while local officials encourage the practice anyway – be warned: You could still run afoul of regulation – while others may require certain language or wording in submissions, or may expect certain roles to be represented at the board level. (Operations in Western Europe, for example, should always check the cultural representation expected by Works Councils.)
There is widely accepted best practice when it comes to global entity management. When working with global subsidiary management, the general counsel and the legal operations teams should, among other things:
- Be mindful of regulations around control and management
- Have clear written policies and guidance for each subsidiary’s governance processes
- Be clear on the relationship between the parent and its subsidiaries, including decision-making responsibilities and signatory powers
- Maintain up-to-date registers of directors’ interests on a global level
- Carefully document and minute board decisions in each entity
How Technology Eases the Burden of Legal Entity Management
Managing entities in one jurisdiction can be tricky enough, but take that legal operations process and multiply it across jurisdictions, across borders and across the world and the challenge goes up several levels. If your organization is managing its entities using an Excel spreadsheet, for example, it can be difficult to ensure that spreadsheet stays up to date and that there is no issue of version control – and that there aren’t multiple versions of the spreadsheet floating around with different bits of information and gaps in data. If there is a change in directors, for example, and there’s no central spreadsheet, legal operations teams risk reporting inaccurate entity data to the register of beneficial ownership.
Thankfully, technology can come to the rescue here: There is now a plethora of systems and software on the market to help ease the burden of legal entity management. By operating in the cloud, these entity and board management systems can create a central repository for all entity data, ensuring that whomever accesses the information is getting the most recent version of events, regardless of where they’re based.
But all of this technology can actually cause as many issues as it eases burdens. While your shiny new board portal is fabulous and helps you to run your board operations much more efficiently, and your equally excellent new entity management software is giving legal operations a much-needed boost, keeping the systems separate can bring additional risks.
Integrate Systems for a Single Source of Truth
Much of the information in the entity management software will be needed by the board at some point, and the details of board meetings and decisions will impact the team’s global subsidiary management, even if it’s just logging those decisions and keeping information up to date in case the regulators come calling. This disconnect between systems becomes especially risky when working on a global scale; the more entities under management, and the more jurisdictions in which an organization is operating, the more data must be logged and shared, and the more likely errors will happen.
By integrating your board portal and entity management software, you can create a single source of truth for your global subsidiary management. The integration creates an essential bridge between the portals, ensuring that information can be shared automatically rather than manually duplicated, in turn helping to reduce the risk of human error in transferring data.
These integrations can be forced, of course, if a clever developer can build an API between the two, but it’s simpler and more streamlined to work with a system that is naturally integrated to help ensure the API – the bridge between systems – doesn’t introduce bugs or security risks into the infrastructure.
Diligent’s Governance Cloud is a global subsidiary management platform that is built as an integrated board portal and entity governance software. It brings you the efficiency and security of Diligent’s board portal and entity management software, while putting actionable insights and analytics at your fingertips. Real-time data and information about the organization, competitors and market movements can be pulled to drive the right insights to make essential strategic decisions, all in the knowledge that the data is not subject to the same risks and challenges of portals that are separate.
Get in touch and schedule a demo to see how Diligent’s secure Governance Cloud can help your board and entity operations run more efficiently, and with less risk.