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Subsidiary Management: Easing the Administrative Burden

At the Society for Corporate Governance conference, corporate secretaries and legal teams discussed streamlining operations in the face of growing complexity.

The Society for Corporate Governance conference is a chance for corporate secretaries and legal teams to share insights on best practices, emerging trends, and pain points.

It’s a gathering of peers—and I was delighted to have been asked to chair a discussion on global entity management at its most recent event. The panel and audience were made up of corporate secretaries and legal professionals of large corporations and publicly traded companies. These professionals are all too aware that subsidiary management is not an activity that gets any easier.

Corporate structures grow over time

Public or private, if you work for a large company with a large portfolio of entities to oversee, you face many of the same difficulties. As we all know, corporate structures have a way of growing without ever shrinking back to their original size. A lot of corporate secretarial time is spent identifying entities for consolidation or closure.

In almost every large company, there will be projects going on in the background focusing on streamlining the subsidiary structure, deduplicating entities, and removing those the organization no longer needs. This takes time and resources. Ultimately, however, entities are easier to form or acquire than to liquidate, so corporate structures continue to grow. Even those that have outlived their usefulness may have a complex web of links to other parts of the organization. Closing an entity can, therefore, involve the coordination of scores of different stakeholders.

A mounting workload

At the same time, the work that goes into maintaining any particular entity gets more challenging.

Like corporate complexity, regulatory pressure tends to rise and never fall. Transparency is the watchword of the age. My fellow panelists were from regulated sectors, such as financial services and energy, whose compliance workloads—already complex—are becoming even more arduous. This is also evidenced in CSC’s recently published research report, The General Counsel Global Barometer 2023, where increased workloads and regulation and governance issues were seen as an obstacle by almost half of those surveyed.

To make matters more challenging, the recruitment crisis means that even large businesses are struggling to find the talent they need. Even if they could, simply employing more people is probably not an answer in itself. To deal with a growing workload, businesses need to streamline as much of the subsidiary management process as possible.

Subsidiary management: Best practices

What does that mean in practice? For a start, it means optimizing the use of technology. Good subsidiary management software can help streamline the management of dates and deadlines and serve as a “single source of truth” for critical company information. They can also help with the back-and-forth of filing and document management and are considerably more efficient than paper and email equivalents. In fact, 66% of over 120 general counsels surveyed said they wanted to implement new technology in 2023.

There is no reason or need to invent an in-house solution. Most corporations will use technology provided by a third-party service, but modern systems can significantly ease the administrative burden. Nearly all major corporations rely on third parties to some extent for international compliance and subsidiary management, typically for registered office and agent services, and for accountancy and tax filing.

One trend we see is towards the consolidation of third-party services. To simplify subsidiary management, organizations are using fewer providers but asking more of them. A global reach—with experts in key jurisdictions and relevant local knowledge—is becoming a top requisite of the outsourcing relationship. What we’re hearing at CSC is that a globally consistent approach alongside minute attention to detail are at the top of our clients’ wish lists and why they value our partnership so much.

Indeed, best practice for international subsidiary management is based on collaborative relationships. These are not just with external providers but also with internal colleagues in finance, HR, compliance, and other functions. At its heart, good entity management is about communication and coordination between these parties.

Getting these relationships right is a direct path to easier corporate governance, even as complexities mount, and with CSC’s global subsidiary management capability in over 140 jurisdictions—a simplified solution may be closer than you think.

Why CSC?

The Society for Corporate Governance conference highlighted the growing complexity of subsidiary management—and how third-party services can significantly ease the administrative burden.

To help you make sense of the growing complexity, CSC offers a global solution for subsidiary governance, fund strategies, and capital markets, navigating the ever-changing compliance and regulatory environment.

With capabilities in more than 140 jurisdictions, we’re able to do business wherever our clients are—something we accomplish by employing experts in every business we serve.

Allison Gerhart is vice president of International Compliance and Governance and an associate general counsel at CSC, where she provides legal advice with a focus on managing the company’s international regulatory compliance efforts. Her goal is to find practical business solutions to legal issues.