Worldwide: The Benefits Of Centralising Corporate Secretarial Functions

Last Updated: 29 February 2016
Article by Matthew A. Eckford

As companies globalise, new challenges present themselves. One such is the need to manage the burden of corporate secretarial activities – scattered across the globe – while working within what is typically an ever-tightening compliance budget.

The two challenges can be met head-on with one solution – centralising the delivery of corporate secretarial activities to a single global provider. Indeed, the benefits of centralising these legal administration activities for multinational corporations (MNCs) can be wide-ranging.

Simplify global complexity

As MNCs expand their global reach, the corporate secretarial workload inevitably increases, though not always in a linear fashion as core tasks become more onerous when they are scattered across a variety of countries where currency, language and even time differences add to the challenge of coordinating secretarial activities.

Highlighting this complexity, many of the world's most attractive destinations for corporate investment are located in emerging markets. In these environments, compliance requirements can be uncertain and continually evolving. This can significantly amplify the challenge of fulfilling corporate secretarial requirements.

By way of example, the Global Benchmark Complexity Index 2015 pinpoints the most – and least – complex countries to do business across 95 jurisdictions. Argentina holds the number one ranking as the world's most complex jurisdiction to undertake corporate secretarial activities, for the third consecutive year. Indonesia comes in at second place, with Colombia and UAE following closely behind at number three and number four respectively. China takes up the fifth spot.

The issues underlying these rankings are well-founded. Indonesia's second place position for instance, reflects a legal system that lags behind its regional peers and is coupled with a high level of disjointed government bureaucracy. In 2015 for instance, the Indonesian government reduced the permit to stay for foreigners to six months. This minor change by a single government department, was highly disruptive for foreign owned businesses as senior management were forced to leave and re-enter the country to renew their permits.

Using a single global solution – a provider with 'boots on the ground' in each jurisdiction – can overcome the complexity challenge. It means more timely and accurate reporting is possible across multiple jurisdictions, allowing head office to manage secretarial compliance more efficiently.

Add value through cost control

The benefits of centralising company secretarial activities go beyond managing and coordinating individual jurisdictions.

It is no secret that legal and compliance teams are increasingly under pressure to achieve more with less. Yet governments around the globe are creating additional layers of compliance as they continue to demand that corporations provide more information about their structures and activities. Some jurisdictions are attempting to reduce red tape but, on the whole, the general trend for the future is for more not less compliance information.

This is coupled with a trend towards greater collaboration between governments – primarily aimed at combating money laundering and other illicit activities, and also to close tax loopholes. Undoubtedly, this commendable, although the bottom line for MNCs is an added (and often unforgiving) layer of stakeholders demanding accurate, timely information about group activities.

The possibility of expanding head office compliance teams to meet this growing international workload goes against the grain of cost structure optimisation. The result is a thinly stretched company secretarial team, whose time is chiefly taken up with compliance activities that don't add value to the organisation or its shareholders.

Using a single global provider doesn't just relieve the workload of head office teams. It also frees up these specialists to focus on activities that make a measurable difference to the organisation's bottom line.

Gains in quality assurance

The concept of using an external provider for global secretarial functions is not new and it can make a great deal of sense both logistically and financially. As we noted earlier, China, one of the most desirable hot spots for commercial investment, may be 'open for business' but it is a highly complicated jurisdiction with provincial laws and languages affecting even basic activities like incorporating an entity. Under these circumstances, using local experts provides multiple benefits.

The pitfall arises when a range of providers are used across multiple jurisdictions. This occurs as MNCs explore new markets, as expansion is driven by commerce demand and lacks 'group' coordination. Far from streamlining corporate secretarial functions, the use of a variety of providers often means disparate methods of charging professional fees (for example, per hour or per project), multiple invoices each with various points of contact, and a general lack of assurance across jurisdictions.

The best of all worlds

Using a single global provider gives MNCs an opportunity to achieve the best of all worlds. It is a strategy that delivers the assurance of high quality compliance while achieving cost reduction. It provides the advantage of coordinated, timely reporting without compromising quality. And by choosing the right provider, MNCs can enjoy the reassurance of measurable standards of quality.

The need to reduce costs without compromising legal administration is not a revolutionary concept. Yet, in an ever more complex commercial environment, the benefits of centralising corporate secretarial activities to a single, proven global provider stack up; enabling MNCs to expand into new markets while maintaining a strong compliance track record.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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