Legal Entity Manager Defined
Legal entity managers act as central points of contact between a business and its regulators and governing authorities. They are responsible for registering and holding the information, including certain data forms, for all legal entities and branches of a business. These legal entities can include traded companies, limited liability companies, general and limited partnerships, or branches.
Whilst a business must answer to multiple regulators located around the world, the legal entity manager provides a consolidated point of reporting to each. It acts as the registered office, where all correspondence from the regulators is held , which then can be distributed internally as needed.
This role is particularly important for businesses that operate in multiple jurisdictions. For example, a regulated entity in the USA may need to submit a tax compliance question to the Internal Revenue Service. This regulator may require a similar or identical question to be submitted to the regulators of other jurisdictions in which the business operates and is regulated (e.g. the US Tax Office or HMRC in the UK). However, the legal entity manager can consolidate these queries into a single point of contact, who submits answers to the questions in the relevant jurisdictions, avoiding the need for duplicity.
Essential Skills and Qualifications
A legal entity manager typically holds a degree in law, accounting or finance. Those responsible for managing a large number of legal entities may also be qualified lawyers or accountants. For those who aren’t, however, an understanding of fundamental corporate governance and corporate law is essential, as is the ability to apply that knowledge across a range of contexts. In most jurisdictions, there are no specific qualifications or certifications that a legal entity manager must possess; the most important thing to have is experience. Working with legal entities in a governance role, whether as a director or other officer, is the best way to develop the skill and judgement needed to be an effective legal entity manager. Direct experience of the types of transactions and decisions that are often made by the board of a company is also invaluable, as it not only helps you to develop an understanding of the technical requirements of corporate governance and compliance, but also the process and best practice to follow.
Financial services experience is useful, particularly in relation to private equity, venture capital, real estate and investment management, where the scale of legal entities under management is likely to be considerable, and the issues that arise from time to time are significant. Knowledge of regulated industries such as insurance and banking can be equally important, and having a basic understanding of the types of products, services and regulations that each sector is subject to will help you to grow into a pivotal legal entity management professional over the long term.
Advantages of Legal Entity Management
In the process of global expansion, complying with a plethora of local laws can be a daunting task for many large organizations. The OECD estimates that there are over 100 jurisdictions with more than 40,000 business entities registered in each jurisdiction. Every one of those entities has its own local set of rules, regulations and reporting requirements. Once an organization exceeds a certain level of size and complexity, keeping track of all of this becomes a major undertaking. It is no longer possible – nor financially viable – for management to supervise the status and standing of all their company’s various subsidiary entities, especially when they span multiple jurisdictions.
A legal entity manager serves as a management tool to centralize and streamline administration of entities around the world. Through a centralized platform, companies have insight into everything from corporate filings and compliance to entire corporate histories and upcoming deadlines to alert them to any weaknesses and risks to minimize financial or regulatory risk down the line. Not only does this prevent potential loss, but also ensures a company’s global network of entities is running smoothly.
In addition, using a legal entity manager for your global network of entities allows for cost savings due to economies of scale. Often times, a company will require a local secretary or consultant who is currently holding multiple positions on the board of an organization. Having transparency of that local consultant’s other board positions and the management of those companies can open up avenues for cost reductions. Having a legal entity manager who plays the different roles of some of a company’s consultants and/or local secretaries can also reduce the level of disconnect present between the consultants and the company.
A legal entity manager can also act as an intermediary between the company and the registrars and other government agencies. Legal entity managers offer to hold dormant companies so organizations won’t need to keep on top of the dormant accounts for their global network of entities. They can also provide notice of new legislation or amendments, minimizing the chance that your company will miss any new legal requirements. A legal entity manager also assists in the preparation of all local documents prior to their execution and submission to the local registrar, ensuring that the company has met all corporate and statutory compliance requirements. Legal entity managers also assist companies with their reporting requirements to securities authorities and stock exchanges such as the SEC or the Toronto Stock Exchange.
The added transparency and visibility offered by a legal entity manager also provides value governance by supporting a culture of sound business management within the organization. This is particularly useful for larger corporations. A legal entity manager will not only ensure that a corporation maintains all current charters, by-laws and share registers, but will also ensure that the company accurately maintains versus its policies and procedures in the management of its companies.
Legal Entity Management Issues
Legal entity managers are often faced with a suite of challenges—once the domain of legal specialists within large corporations. But as those responsibilities now encompass the work of finance, tax, compliance, risk and other organisation-wide functions, those people in charge of legal entities quickly need time, insight and an international scope to manage the process effectively.
What this means for organisations is that as long as they are in the business of operating in more than one jurisdiction, and there are multiple legal entities which must be managed , the challenges of legal entity management reach well beyond the basic requirements of keeping up with a jurisdiction’s regulatory environment. There are several factors to consider: The only way for a small number of people to manage and control the complete legal entity management process is to have an accurate and reliable central repository of information, accessible through organisation-wide training and best-practice processes. They must also include all stakeholders in a centralised process of case management, and streamline the use of local service providers.
Tools and Applications for Legal Entity Management
The right tools and software to ease the management burden for legal entity managers comes in different packages. Smaller firms and those without extensive resources tend to rely on spreadsheets and legacy software to get them through the process. Better-integrated technology is currently the domain of the larger firms that typically have a larger network for overseeing multiple entities – either in one location or across different jurisdictions. Software that manages legal entities must be able to provide alerts and responsive features for legal, compliance and tax obligations. It should also be able to link documents and entities and be able to search document libraries.
The most popular ones we see on the market are Workiva and IntraLinks for document aggregation, Oracle Business Process Management or K2 for workflow, and ServiceNow for applications management and permissions. Legal entity managers prefer integrated software platforms that apply commercial contract law to legal entities to automate contracts and obligations, that apply enterprise resource planning (ERP) methodologies and technologies with automated, algorithm-based processes for business transactions and deliver agile development for the exchange of information between users. Benefits include improved throughput (turnaround time), reduced costs, higher quality and lower risk.
More traditionally, an organization’s legal departments may use legal management software and Microsoft Office products; due to the cost, smaller teams and companies either use spreadsheets or do it manually. Regulatory and compliance-related tasks can typically be tracked using Excel but are not necessarily automated, nor linked to a dashboard for managing deadlines. Excel is strong in document creation and with macros, can be fairly automated but doesn’t lend itself to be as integrated as a more comprehensive software tool would. However, as firms continue to move toward cloud-based applications, multiple links to data sources and automated workflows, even smaller firms are finding value in more robust software for legal entity management.
Future Legal Entity Management Trends
Adapting to multifaceted and rapidly changing environments, legal entity managers will utilize management information systems (MIS) to better gather, analyze, and report on data relating to their companies. Such systems allow entity managers to store vast amounts of information in a centralized, organized manner. This, in turn, will allow for a greater ability to measure the increasing expectations of various departments and stakeholders. It will also allow for a senior management reporting function that will give insight beyond financial metrics.
Emerging regulations require improved audit and compliance trails . In keeping with this trend, the Sarbanes-Oxley Act requires that public company controls enable accurate and reliable reporting and record keeping; it also requires disclosure of all material off-balance sheet transactions. The United States also has dozens of anti-bribery and corruption laws, both foreign and domestic. Under the Foreign Corrupt Practices Act (FCPA), for example, a public company’s records must: The trend toward risk management continues. Embedding risk management into business processes, instead of managing risk as a separate and standalone program, will impact decisions made by legal entity managers. Based on these changes, these managers will be able to assess and evaluate risk and encourage more responsible behavior and compliance.
