Advances in technology can help in all aspects of running a business and the corporate compliance is no exception. Incorporating technology into this increasingly complex and changing activity is imperative and should be part of your business' key strategies.
The roles of the company secretary and compliance officers have become more challenging due to the increase in the complexity of the regulatory legislation and the pace that it is changing. Staying on top of these changes and initiatives requires much more time, work and money and is affecting every business around the world.
The difficulty of adhering to business regulations across 84 countries was surveyed and the results were compiled in the Compliance Complexity Index. The report gathered information related to the complexity of setting up and maintaining local entities, as well as the impact of new regulatory legislation in the countries. Understanding the diversity of regulations and keeping up with their applicability across the world, can be one of the most important activities to ensure compliance and safeguard the good reputation of your business, both globally and locally.
The introduction of technology into legal operations facilitates the access to corporate documents and data from international subsidiaries, and allows for proper tracking and maintenance of compliance related activities and decisions. This helps legal departments to become more efficient and increase their productivity.
Technology as an enabler
Technology is becoming very important when it comes to corporate compliance. E-signature systems are an example of a technology that can aid a business' corporate secretarial operations. Using this technology, where the local legislation allows, removes the need for a face-to-face meeting in order to sign documents. This can make the corporate filings faster and bring efficiency to your legal department.
Entity management systems are one of the most valuable tools to multinational companies, as they allow for a single way of viewing the legal operations of international subsidiaries and therefore, it becomes less challenging to identify areas of non-compliance. In addition to that, entity management systems offer instant access to corporate information and relevant documents, which can help general counsels to report discrepancies to top management, and support their strategic decisions when it comes to advising where to invest or close operations.
Nevertheless, technology is not yet replacing the need for local knowledge, as most countries demand that records are kept locally and on paper, or that signatures of the original minutes or resolutions have to be in the company's statutory records.
And that's where the challenge begins: keeping online corporate data and documents matching the statutory and public records. This works when good processes are in place, and they are particularly important because most multinationals have a hybrid compliance programme involving international legal departments, legal advisors and service providers. Without well-thought procedures, accountability and commitment, it will be very difficult to build the necessary cooperation to maintain your entity management system up to date in all jurisdictions.
Updating an entity management system is no easy task, requiring: collecting, scanning, validating information, uploading documents and extracting data from these documents to update them into the system. You need a person in house who is both IT and legal savvy to update your entity management system: documents must be correctly interpreted and the information extracted from the document must be translated into the many fields of the entity management system in the correct way. All these necessary activities will bore even the most inspired and supportive staff in legal departments, which means that human error and delays will occur frequently, culminating in misleading information which cannot be used for the purpose it was supposed to.
While the implementation of technology has many benefits, it also opens your business to cybersecurity threats. Companies must make sure that they are doing everything they can to keep customer and client data protected and safe. The types and severity of cybersecurity risks depend on where the entity management system is set up and this varies per vendor. The information could be held in the public cloud, private cloud, on the vendors' servers, on the clients' servers or in other areas. The risks can also depend on the sophistication of the security model of the system, which can vary.
There isn't a one-size fits-all solution, however, the cooperation between legal, risk and IT is necessary to assess the risks of rolling out the system globally. Legal departments should also keep in mind local data protection requirements, such as GDPR or the Personal Data Protection Act in Russia.
The digitisation and sharing of information across borders means that companies must have clear business recovery and remediation plans for the event of a cyber-attack. The repercussions can include reputational damage, as well as loss of revenue.
Training staff and including the updates of the system into their new routine may be incredibly challenging, as technical knowledge can vary throughout the company. Misleading information is a risk to company strategy.
Living in a world where cyber-attacks are the new way of putting a company's reputation in question, it is adamant to check the security model and hosting options of the vendors of the entity management systems.
When it is decided with which entity management system you will work, it makes sense to schedule a periodical health check, ensuring that the online information and documents are the absolute reflection of the information and documents available in the public and statutory records of the companies. If keeping the entity management system with accurate and updated data becomes a burden, it is time to see how others can assist you with the development of a better maintenance process, delegate the job to someone else, or assess if the system you are using is fit for its purpose.
Even if you are certain that your entity management system contains accurate and up to date information, and that your e-signature system complies with the local legislation of many countries, electronic copies will not be enough to some local authorities, and others may require additional security measures when it comes to personal data. It is always recommended to have permanent access to a local subject matter expert who can provide you with the latest requirements of the jurisdictions where you have interests or operations.
Using a service provider for your business' corporate secretarial services can help you remain compliant without having to implement the technology yourself. TMF Group helps companies to become and remain compliant with local and global requirements in more than 80 jurisdictions globally. From set-up to liquidation, our professionals take care of recurring filings, routine corporate changes and retrieval of corporate documents from official registries, such as certificates of good standing. Having a trusted partner is imperative to making your corporate secretarial operations more efficient.
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.