A recent report by the Association of Corporate Counsel and Deloitte Tax found that more than one in four organizations (26%) say that at least some of their corporate entities have been out of good standing with regulators in the last two years. Additionally, 9% of survey respondents said that a delinquency regarding a corporate entity’s status with regulators has impacted a business transaction. The top corporate entity management pain points identified by the survey respondents were having too many competing priorities (62%), a lack of bandwidth (49%) and inconsistent processes (37%).
The report, titled An Inside Look at Legal Entity Management Practices, was based on a survey of more than 500 legal and tax professionals from various industries and regions. The report aimed to provide insights into the current state and challenges of legal entity management (LEM), which is the process of managing the governance, compliance, and administration of corporate entities.
According to the report, LEM is becoming increasingly complex and demanding due to the growing number and diversity of corporate entities, the evolving regulatory landscape, and the heightened risk environment. The report found that organizations that implement LEM leading practices, such as having a dedicated LEM team, using an electronic database, and conducting regular audits and monitoring, experience more effective and efficient business outcomes than those that do not.
The report also highlighted some of the benefits and opportunities of improving LEM, such as reducing costs, enhancing compliance, increasing transparency, and facilitating mergers and acquisitions. The report recommended that organizations adopt a holistic and strategic approach to LEM, which involves aligning LEM objectives with business goals, establishing clear roles and responsibilities, implementing consistent policies and procedures, leveraging technology and automation, and collaborating with internal and external stakeholders.
The report concluded that LEM is a critical function that requires continuous attention and improvement from organizations. The recommendations of the GAO can strengthen organizations’ LEM posture and resilience in today’s challenging environment.
