Global obligations and statutory duties surrounding entity governance and compliance are increasing as regulators, stakeholders and investors are demanding greater transparency by imposing new or more stringent requirements. Base Erosion and Profit Shifting (“BEPS”) initiatives, including country-by-country reporting, are key examples of this, as well as an increased focus by governments on subsidiary governance. These trends place burdens on companies that often have limited resources and expertise both domestically and internationally.
The ‘current state’ approach for many businesses in this area is often ad hoc and difficult to manage. Complex group structures only serve to amplify regulatory, legal, financial, and evidential risk. This is coupled with a lack of central oversight, inadequate internal processes and controls, disparate service providers, little visibility and control over costs, and a scarcity of reliable, current information.
There is an increasing need to have more control at the parent level with respect to a group’s legal entities to better manage growing compliance obligations. Companies are wanting improved processes and workflows to proactively manage compliance obligations and to identify potential outstanding non-compliance issues earlier in the process. Legal and internal audit functions now have a stronger focus on governance and legal entity management controls.
The risks associated with noncompliance and governance failures have dramatically increased. These can include reputational risk and financial penalties, as well as the inability to operate in certain jurisdictions. But it may also mean personal liability and prosecution for directors and officers of the entity – an often surprising, but real consequence that is catching the attention of multinational corporations.
Being ‘ready for change’ continues to be a key mantra for multinational corporations. Core corporate functions should be agile and ready for structural changes as multinational groups are reviewing their corporate structure and pursuing transactions to meet strategic business initiatives such as expansion and growth.
ILC Legal, LLP, as an independent law firm in the PwC network, works directly with PwC professionals across the PwC network to provide a seamless multi-jurisdictional approach to entity governance and compliance. Specifically, we will help you identify the right resources in the right geographical locations to ensure you have the expertise you need for legal entity management. This extends to resources throughout the PwC network, including the PwC’s global entity governance and compliance network as well as the PwC’s global legal services network – providing you with a full array of specialists.