Administering subsidiaries or branches can be a big problem for international corporations. They must fulfil legal and tax obligations separately for each country in which they operate. And in this respect, Poland poses a significant challenge.
In the 2018 edition of the Compliance Complexity Index, which assesses 84 jurisdictions globally in terms of how difficult it is for companies to comply with local laws and other related issues, Poland took 9th place. It's the only European country in the top 10, and the country's placing indicates the complexity of Polish law around corporate compliance is very high. Foreign companies that want to develop their business in Poland face many obstacles. Most often, it is the time-consuming process of starting a business, especially if the company has many foreign shareholders. Although it has one legal system, courts in different districts may interpret regulations differently, which leads to an inconsistent approach to reporting and enforcing legal requirements.
It is true that Poland has taken decisive steps to simplify regulations, but global trends towards financial transparency and obligations related to compliance, hidden under many acronyms, are becoming more and more overwhelming for company heads and their legal teams. These include BEPS (Base Erosion and Profit Shifting), CRS (Common Reporting Standard), AMLD5 (Anti-money Laundering Directive), UBO (Ultimate Beneficial Owner) and GDPR (General Data Protection Regulation - RODO, General Regulation on the Protection of Personal Data).
Meeting the challenge
Managers face a choice; to deal with corporate compliance challenges alone or to work with a provider who can offer a global service and technical assistance in-country. This support can be provided at a base level, such as for conducting annual or special meetings, distributing dividends and adopting resolutions for each branch of an international company, affiliate companies and partners in a joint venture.
Regardless of company size, location or whether it is public or private, there is a need for a robust global corporate secretarial (CoSec) program that combines effective entity administration, management, compliance and risk mitigation systems. TMF Group meets the needs of entrepreneurs and offers such a service in Poland, and more than 80 other jurisdictions worldwide.
"There are many new regulations and new reports that multinational companies (MNCs) must present to a local or a central authority, for example, the notary, corporate registrar or the European Central Bank. And if you don't have your information consolidated or presented in the right format, MNCs risk not being able to move on with their business activities in certain countries. For the MNC, as well as its in-house counsel, your reputation for taking care of the business can be put at risk" explains Priscila Westerhof-Fittipaldi, Portfolio Director of Corporate Secretarial Services at TMF Group.
The Victaulic case
One of the main priorities for internal advisors and their teams is to help the company maintain its liquidity and compliance in all jurisdictions in which they operate. It means supervision, control and anticipation of business needs. Maintaining everything in-house may seem like the optimal solution, but corporate management and compliance for many subsidiaries around the world is a huge and time-consuming task. Qualified specialists must spend hundreds of hours monitoring deadlines, interpreting local rules, and then preparing and sending (after placing, notarising and legalising) these documents in the local language. It's also necessary to conduct periodic subsidiary ' health checks' to assess their ongoing compliance. Even with great project management and an accurate and individual calendar of international corporate deadlines, the challenge begins again each time a subsidiary is incorporated in a new jurisdiction.
"To be able to do it alone, the manager must coordinate all countries from his/her own location, and find competent, experienced staff who communicate not only in the local language (also using specialist reporting terminology), but also in the language of the company headquarters" says Ms Westerhof-Fittipaldi. Managing these issues on your own is also very expensive, because legal services carry a premium price tag.
Victaulic, the world leader in the production of pipe joining solutions, faced such problems. Operating in over 100 countries, the company's scope makes its corporate secretarial function of key importance.
"We quickly assessed that our situation required a top-tier partner to provide global corporate secretarial services. The level of staff and local expertise required to stay current, maintain compliance and achieve timely filings of all required documentation might have otherwise required a very different staffing model," says Mark Van De Voorde, Victaulic's Chief Legal and Administrative Officer.
Victaulic chose TMF Group and its global CoSec supplier model as the best solution on the market. TMF Group has offered central, standardised and coordinated options for all its global clients. It also allows customers to choose direct cooperation with its local offices and experts. The ability to ensure timely compliance in all locations from a central point (for Victaulic and TMF Group it is Luxembourg) but also visibility and access to local contacts has provided double benefits: certainty and expertise.
Is the use of a business services provider with owned-offices and in-house experts really so beneficial? According to Ms Westerhof-Fittipaldi, absolutely yes.
"If there is any legislation change or if an issue arises from a previous filing, our clients can have a conference call immediately with the relevant TMF Group office and can be given a plan for how to solve the issue or adapt to the law change. In other cases, our clients may have heard about an upcoming change, but it's actually not as dire as it sounds on the surface. They can have everything explained to them and be reassured, essentially there's no guesswork."
"Another benefit of having an external corporate secretary is that TMF Group does not overlook underperformance or lack of responsiveness. "The responsibility stops with us. Our clients – even those dealing with many of our offices – have a main contact and a clear escalation plan, so if a certain employee is not doing their work in a country, we have the authority to deal with that directly unlike providers that rely on other companies and don't have the same accountability and control."
For Victaulic, working with the same CoSec supplier in almost all jurisdictions has provided a necessary sense of security. Taking into account the rapid pace of change in the global regulatory landscape, and a lack of in-house legal expertise in some jurisdictions, adopting a model that uses the extended suite of services offered by TMF Group was a perfect fit.
Need more information? Contact us today.
Replay our recent webinar: Compliance and regulatory developments in EMEA
This article was originally published by Harvard Business Review Poland.
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.