Can rethinking legal entity management help general counsel seize new opportunities?

No business wants to leave potential deals, sales or cash on the table. In fact, the latest EY Global CEO Outlook shows 9 out of 10 CEOs are planning some form of transaction over the next 12 months. Their major focus? Joint ventures, strategic alliances and divestments — indicating a desire to reassess portfolios or tap into potential boosted by the reopening of initial public offering (IPO) markets.

Beyond that, more CEOs are allocating capital to their merger and acquisition (M&A) budgets this year than last. This underlines an expectation of actively pursuing acquisitions in the next 12 months. Organizations must be nimble enough to jump on opportunities, or divest of assets, quickly. Maintaining a firm grasp of legal entity management can definitely help — and this is true regardless whether you’re the in-house counsel of a national company with a handful of subsidiaries, or a multinational conglomerate with hundreds of entities around the world.

A recent EY Law survey showed nearly 90% of organizations surveyed in 2021 reported challenges in legal entity management. In addition:

• Some 87% of General Counsel said their department spends too much time on repetitive tasks, such as legal entity compliance.
• A further 88% of legal departments cited entity management as an area where they could potentially realize savings as they seek to reduce costs.
• Two-thirds of organizations use multiple providers to manage legal entities — and are realizing fewer benefits than the one-third that opt for a single global provider.

Many times, the task of maintaining entity compliance gets deprioritized due to the sheer volume and administrative nature of the work, as more pressing matters rise to the top of the priority list. What is the end result? Risk. Risk to the business and risk to the officers and directors of each subsidiary, including inaccurate legal entity data and director liability — and hampered deal readiness.

How does that take shape in real life? Consider the multinational that set up a subsidiary 10 years ago to meet local contractual obligations but hasn’t filed necessary reporting in the years since. Suddenly, there’s an opportunity to sell or divest — and internal teams are left scrambling to update files.

Managing legal entities more effectively supports deal readiness while reducing risks — and it’s easier than you think to refocus on this area.

At EY Law, we recommend asking three key questions to get those building blocks in place now:

1. Do we have the right people focused on legal entity management? You’re in the business of building a business. That means selling, innovating and expanding the reach and success of your company. Record-keeping may not be a core competency or skillset in the business or in the general counsel’s office. Ensuring you have the right people dedicated specifically to managing legal entities may require you to cast a broader net, align with a managed service provider or otherwise bolster your team. The key is to invest in the right people now. Ensuring you have eyes on this area consistently prevents you from inadvertently making costly oversights and having to play an expensive game of catch-up down the road. EY Law teams can help you focus on your core areas of responsibility and support your team, at home and around the world.
   
   
2. Is our legal entity management process built to handle today’s realities? When you have a standardized process in place to manage any area of a business, you can eliminate guesswork, cut down inefficiency and generate more reliable outputs. That’s as true for legal entity management as any part of your operations. Because legal entities can reflect a veritable spiderweb of companies and subsidiaries spread around the globe, this area is often rife with geographic, legal and jurisdictional nuances. At EY Law, we’ve built our own global methodology and process for consistently helping manage  legal entities. Employing a option like this can streamline your process and speed up your compliance, all while generating in-house agility that allows you to make decisions with confidence.
   
   
3. How can technology further reduce costs, risk and problems? Digital transformation is now revolutionizing general counsel’s offices around the world. This shift toward digitized solutions brings with it a great potential for legal entity management, too. Adopting or acquiring a tech platform to track progress, ensure deadlines are met and spot potential issues — for example, through dashboards or heat maps — can go a long way towards improving efficiency across legal entity management. Consider how and where to connect your people and processes with leading tech tools to quickly make a positive impact.