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Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

Foreign subsidiary management tools

Ten years ago, this item was barely on the radar screens of most U.S. companies. But as we predicted way back then, “globalization” is no longer a concept, or an aspiration, or mostly marketing fluff – it is now a big part of our everyday workaday world.

First came SOX – which made it more imperative than ever to have tight controls over exactly who can authorize what at public companies – and where in the world they can do it – and whether they and their subsidiaries are in compliance with the local accounting, corporate governance and filing rules. Then came Dodd-Frank, with even more compliance mandates…and nowadays, increasing calls for harsher penalties when rules are broken or ignored.

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And currently, we are heading for an all-time record number of mergers, acquisitions and spinoffs – virtually all of which have global entities that need to be dealt with and/or disposed of properly. In the old days most companies used their local outside attorney to manage their foreign entities, and most of them ‘outsourced’ to local laws firms where the entity was located. Not a very efficient or cost-effective solution to say the least.  

Here’s another set of little known facts that should get your attention: In many non-US jurisdictions the failure of a local subsidiary to file timely with local authorities can delay or prevent a deal involving the sub from going through altogether – and worse yet – can subject subsidiary directors to severe fines and penalties.

And now…OUCH!...we have “BEPS” (“Base Erosion and Profit Shifting”) standards and reports to worry about…along with CbC reporting by MNEs (that’s country-by-country reporting by Multi-National Entities for the uninitiated) – thanks to the OECD:

As we write this, major changes are afoot on the global subsidiary scene – with 39 U.S. and foreign governments that now subscribe to the Organization for Economic Cooperation and Development Conventions looking to assure that there are real, and sometimes fairly substantial operations going on at foreign subsidiaries, in order to qualify for the tax sheltering that gave birth to the entire system.  So look for more filings – and for more detailed filings – and for more ‘policing’ – and probably for bigger fines and penalties for failing to keep up with new rules.

The good news is that there are several firms that are really GOOD at this – that have excellent systems and procedures in place to keep your corporate records up to date, and that have local resources ‘on the ground’ and fully up-to-speed and up-to-snuff when it comes to keeping all your foreign subsidiaries fully compliant.

Currently, we have no recommended suppliers, but please feel free to contact the editors if you would like additional background information and a few names to investigate.