Lawyer Monthly - May 2022

34 WWW.LAWYER-MONTHLY.COM | MAY 2022 writing really is on the wall. You need to act quickly. Whether you have assumed too much or understood too little is beside the point. A fine for the company could be just the start. Individual directors frequently end up in the firing line. Commercial penalties can even include exclusion from a local market entirely – as Uber famously found out in South Korea. Regulatory jeopardy often comes in concentrated form. The jurisdictions that are hardest to navigate are frequently the most punitive. Web of Confusion Seeking help at the jurisdiction level, while common, carries its own dangers and disappointments. Acquisitions or expansion into new jurisdictions always carry a more-or-less urgent need for local know-how. Engaging another local service provider seems logical at that moment. In time, the result is a patchwork of local service providers – some might call it a hodgepodge – which quickly comes to manifest many of the features of the original problem. From the centre’s perspective, this collage of local service providers can only ever deliver a fragmented service. Duplications, overlaps and inconsistencies – all inevitable – drain executive energies and drive-up costs. With so many gaps in the fabric and disconnects in the processes, things inevitably still get missed and the penalties keep coming. The global minimum tax rate will require every cross-border company to review its operations and monitor events in lowrate jurisdictions, even if it falls outside the OECD’s definition of ‘large’. Local rules (not IFRS or US GAAP), with all their quirks, still dominate world accounting, and more than half of jurisdictions insist firms adhere to them. Complex accounting and tax processes, allied to strict local language requirements, are among the reasons France and Turkey both remain such particular challenges for incoming investors. Answering the Unanswerable Question ‘Are we up to date?’ used to be a perfectly reasonablequestion inentitymanagement, but it has become unanswerable for most cross-border businesses. In a regulatory environment this complex and rapidly evolving, good practice is to review the good standing of an entity at least once a year. That is a potentially paralysing workload for many in-house legal teams. Trying to muddle through, while hoping for the best? It is surprisingly common, but a formula for disaster. Regulatory and legal failure becomes a matter of when, not if. If that sounds familiar, you have probably been seeing the signs: - Late filing of things like company accounts is a clear indication that existing processes are due for a rethink. - Random checks and surprise audits by regulators should not ring alarm bells, but frequent requests for extra information are another matter. - If you are already receiving penalties, the Worse, of course, is the fractured view this approach still provides. GCs still have to struggle to refine the competing voices, perspectives and cultures into the compliance risk information they really need – transparent, certain, consistent, and which can command the confidence of the business and its board. It is an uphill struggle. Conclusion As general counsel and legal department leaders look out on this confusing terrain of shifting threats and sticking plaster ‘solutions’, they could be forgiven for shedding a tear. The entity structures of a business are its legal foundations. They must be maintained in a rigorous, consistent and orderly way. But that effort should not be allowed to drain the life out of the company’s in-house legal experts. Surely there must be more elegant, holistic way to do this? One that brings simplicity, consistency and timeliness to the way the full range of entity management support services are delivered and documented in any jurisdiction? If only. BRINGING CALM TO THE CONFUSION OF GLOBAL ENTITY MANAGEMENT TMF Group is an international provider of administrative services. Its 9,100 experts provide legal, financial and employee administration through the Group’s 120 offices worldwide. From the centre’s perspective, this collage of local service providers can only ever deliver a fragmented service.

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