M&A in the Asia-Pacific (APAC) region continues to thrive, but a complex, multi-jurisdiction environment can increase the risk of regulatory non-compliance. Boie Ho, commercial director, Global Subsidiary Management & SPV Solutions, APAC, Donald Tsang, executive director and head of Corporate Services, Greater China, and Quinten Kah, commercial development director, discuss how technology and a good governance framework can help with mitigate risk. They explain how corporate outsourcing could be a cost-effective solution that can free your team to focus on the areas of the business where they add most value.
M&A activity continues to grow in APAC, driven in part by the post-pandemic economy. eCommerce, hybrid working, and artificial intelligence (AI) have created new opportunities for investment in infrastructure, technology, logistics, and warehousing.
APAC is attracting ever more multinational companies. CSC’s recently published research report, The General Counsel Barometer 2023, surveyed multinational companies’ general counsel and found that many (44%) want to expand into Asia. So the question acquiring companies face is how to best manage an expanded fleet of often diverse entities in different jurisdictions.
Integrating acquired entities post M&A is always a challenge—especially when entities are managed by different vendors using different processes and systems then the parent companies. Different companies might each have their unique organization culture.
In APAC, a wide variation among jurisdictions makes this challenge more complex than in the U.S. or Europe. The language of business varies from jurisdiction to jurisdiction, as does the regulatory framework.
China has a very different legal system from other locations such as Hong Kong, Singapore, and Malaysia, for example. Meanwhile, some jurisdictions maintain practices that could strike some as old-fashioned, such as requiring physical documents and “wet ink” signatures.
It’s important to get post-M&A subsidiary integration right. Operational inefficiencies, lack of data transparency, and governance are some of the severe consequences that can result from poor subsidiary management. In a worst-case scenario, penalties are imposed for non-compliance and restrictions are placed on business activities and business license renewal. In extreme cases, prison sentences can be given to business owners or directors. Such situations damage a company’s reputation and staff morale.
It’s possible to avoid these problems by viewing post-M&A subsidiary integration as an opportunity to streamline workflows, introducing proper frameworks and processes within the new, merged administration. In APAC in particular, the trend is to create a regional hub—for example, in Hong Kong or Singapore, a centralized hub can oversee subsidiaries in multiple countries through one service provider.
Global subsidiary management solutions
Increasingly, companies are realizing that consolidating regional or global subsidiaries under one roof can give them the necessary agility to make the most of market opportunities, ease workflow pressure, and identify potential cost savings. By taking this centralized approach, the person in charge can benefit from having a single point of contact to ensure data accuracy and avoid inconsistent processes, ultimately ensuring good company standing.
Another popular strategy is for companies to carry out an initial corporate health check (CHC)—also known as a body check for entities—on their post-M&A structure. Their chosen global subsidiary management (GSM) solution performs CHC by cross referencing public and internal corporate records, ensuring up-to-date information for entities remaining in the new structure, and liquidating any entities that overlap.
The service provider thus acts as the company’s extended legal team and gatekeeper to their global corporate governance practice, leaving in-house legal teams free to concentrate on other legal tasks.
Third-party software has long been used to help teams working in multicultural environments to navigate legal complexity in places such as Europe and the Americas. Advanced GSM software solutions allow for good data visibility across entities, thus improving the overall governance standard, while an entity management platform such as CSC Entity ManagementSM enhances compliance oversight. APAC headquarters of multinationals are now looking at implementing similar software or entity management systems (EMS) to achieve automation and consistent processes.
Our GSM solution in Asia includes our award-winning CSC Entity Management software and aims to support in-house legal operations to act as a regional hub, allowing them to work across jurisdictions in a more efficient and cost-effective way. CSC Entity Management can also be configured for each company’s unique needs, with role-based access permissions for team members.
Above all, our GSM solution uses technology to prevent errors and streamline workflows by creating one trusted source of information. This doesn’t only benefit legal and finance teams by providing them with data transparency across multinational teams, it also ensures good company standing by allowing senior management to access a single source of information.
Today, corporate governance is more complex than ever. Legal teams must keep on top of fast-changing regulations, often on reduced budgets. Nowhere is that complexity greater than in the growth market of APAC, where jurisdictions remain variegated in terms of language, cultures and rules.
The rise in legal technology makes it easier for companies to find an advanced solution for their global GSM needs. Within APAC, a solution based in a regional hub can smooth complexity and drive consistency.
Read The General Counsel Global Barometer 2023 report in full to find out how entity management is evolving around the world.
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