In-house legal teams face numerous barriers when expanding internationally. These range from understanding the complex, multi-jurisdiction regulatory landscape, to a lack of local knowledge and expertise, and from resource constraints to contractual and data privacy requirements. Due to their role within multinationals, in-house legal teams also tend to be responding to scenarios such as setting up new entities reactively or “behind the ball,” making all of the above barriers even more challenging.
To understand the pressures faced by general counsels (GCs) and their teams in more detail, we carried out research with 300 GCs at multinational companies within the Americas, Asia Pacific, and Europe. We found that most firms plan to set up new global subsidiaries at the same volume in 2024 as they did in 2023.
While the study shows that GCs are positive about their plans for future expansion, they are also realistic about the challenges they face when establishing new entities across the world. When asked what they saw as the biggest barriers, they said that their top three issues were:
- Putting infrastructure in place rapidly (cited by 61%)
- Identifying a premises or a process agent (45%)
- Selecting and incorporating the right entity type (43%)
Interestingly, the top risks mentioned are all very early steps when it comes to setting up entities. And failing to deal with those challenges from the outset jeopardizes the efficiency of getting a new entity up and running quickly. The impact of such delays can be damaging. They can lead to a multinational failing to get a business functioning within its planned timelines, which in turn has an effect on time to market and budgeted income, reinforcing the crucial nature of expertise and efficiency in global entity expansion.
Ongoing issues for GCs
Beyond setting up an entity, other top challenges faced by legal teams include understanding and navigating local nuances, team workload, or staffing concerns.
The next three challenges identified by our study were:
- Understanding the local legal system (33%)
- Issues with privacy laws and data protection (31%)
- Talent acquisition and retention (31%)
Understanding local laws and regulations is an integral part of international expansion. Our research with GCs at multinationals found that they’re broadly confident in their ability to understand the regional legal environment. However, our experience shows that managing the process of keeping up to date with changing regulatory frameworks in multiple countries becomes ever more complex the greater the number of countries involved. The confidence GCs have in their in-house abilities doesn’t always guarantee being compliant in each jurisdiction. Instead, this depends on how well the local team or their third party law firm is on top of ongoing developments.
Being able to maintain a team of experienced legal professionals who understand the local nuances and ins and outs of operating in multiple jurisdictions is key, in our opinion. For example, does a legal team have the budget, bandwidth, and experience to maintain entities from the U.S., say, to Luxembourg or Singapore? Across the board, responsibilities and workload for in-house legal teams only seem to increase.
And the risk of having under resourced teams can be critical. Sometimes it can take years for corporate service providers to uncover discrepancies in a filing history, for example. This can occur when filing requirements change in a specific country but go unnoticed. If such issues are overlooked, it can lead to inadvertent non-compliance with local legislation. When asked as part of our study what impact non-compliance could have on their business, GCs responded that the biggest problems would be that it could:
- Prevent successful expansion elsewhere
- Lead to fines
- Prevent the multinational’s ability to trade in that jurisdiction
- Lead to reputation damage
Clearly, the stakes are high for GCs working hard to support multinationals’ strategies to expand their entity portfolios. The good news is that corporate service providers can deliver platforms that are built from the ground up to avoid delays to start-ups and managing entities day-to-day.
How CSC can help
CSC, as a market leading corporate service provider, helps address the top concerns expressed and experienced by GCs. CSC’s Global Subsidiary Management solution harnesses the power of CSC Entity ManagementSM, our market-leading technology platform to support centralization and the complete oversight of critical legal entity data—reducing uncertainty and risk.
Our technology combines with a centralized service model that allows us to deliver our Global Subsidiary Management solutions in 140 jurisdictions around the world. We help multinationals take a flexible approach to establishing new entities, by collaborating with a local law firm to get the new subsidiary up and running quickly, or working in parallel with multiple entities instead of managing their set-up one by one.
By choosing CSC as your partner, clients can mitigate some of the operations risks they face when expanding their footprints because of the framework and bespoke services we offer.
Interested in finding out more? Download and read our latest General Counsel Global Barometer 2024 report.
