International transactions place unique burdens on legal and compliance teams and outside counsel. From the initial agreement to due diligence, deal planning, negotiations, and closing, each step can impact the outcome of the deal. But the work doesn’t stop once the deal is signed.
4 post-closing activities not to overlook following an international corporate transaction
Facilitating a smooth transition, tying any statutory loose ends, and reaching the desired “business as usual” state is the main goal of corporate legal and compliance teams and the attorneys who support them.
This requires a robust post-transaction strategy that establishes a cohesive entity management and legal compliance program wherever operations are being conducted. Without one, even the smallest details when overlooked can expose the business to unwanted risk.
Here are four post-closing activities that legal and compliance teams should not overlook following an international corporate transaction.
1. Planning post-closing activities with key stakeholders
Post-transaction planning can help guide internal and external teams on what the future state of the operating model will look like and what necessary legal compliance actions are needed. Getting insights and buy-in from key stakeholders is necessary to ensure that the overall business goal will be met.
A useful initial question to ask is “what does ‘business as usual’ look like?” The answer will guide activities and strategy and help teams align with the business’ priorities.
There are also many compliance considerations in the answer especially if the surviving or acquiring entity plans further changes such as a brand or name change, changing entity types, or expanding product lines and markets. Some of those considerations include:
- Will a new entity be formed?
- Will additional entities be required or, are there any that need to be withdrawn, dissolved, or liquidated?
- Are there any specific local requirements in each location where there are operations?
- What will the new management team look like?
- Will existing officers and directors integrate, or will there be any changes?
- Does the registered address need to be updated?
- Will there be a change in the international registered agent?
- Are there any trademark registrations?
- Will product lines be updated or new ones introduced?
- Will HR processes and employee policies need updating?
Other activities to plan for – and they are by no means insignificant – include post transaction filings or “clean up” filings to ensure that local government records accurately reflect the merger or acquisition, approval of bylaws or operating agreements, stock of membership certificates, asset transfers, business licenses renewals, and tax registrations.
2. Conducting health checks and risk assessments
While due diligence provides critical insights into the overall state of the business at hand, for compliance purposes, and especially for those businesses abroad, health checks are a useful tool to assess the compliance standing and pertinent vitals of a company within a jurisdiction. Health checks can help quickly identify gaps within the entity or group of entities acquired/merged that pose a risk to the business.
This is a proactive action that can provide legal and compliance teams with important information that may have been missed during the deal phase.
Conducted before integration begins, it can help protect timelines, avoid penalties, and set a course for appropriate corrective actions to mitigate any risk of non-compliance that might impact integration. Left too late, it can be much harder to gather information and documentation as legacy employees may leave the acquired company.
Once details have been gathered, focus should be given to areas where the greatest exposure lies or are critical to overall operations. This will allow for timely remediation efforts to ensure risks are avoided or minimized and the integration progresses smoothly.
3. Establishing an efficient subsidiary framework
An important aspect of determining what “business as usual” will look like involves understanding how the surviving entities or new entity structures will be integrated within the organization.
To do this, legal and compliance teams must review the current organizational structure and align it with the desired final state. Will a new entity or entities be formed? Are there any domiciliation requirements for the surviving entity? Are there any dormant entities that need to be liquidated or dissolved? What entity type or types are better suited to meet the business’ needs? The fiscal and statutory implications of these actions should be considered as local governments have unique regulations for businesses involved in corporate transactions.
In some jurisdictions, for example, companies aren’t allowed to form, consolidate, liquidate, or dissolve entities until all outstanding compliance tasks are met. This can be time-consuming and delay integration timelines. Additionally, acquiring companies may be on the hook for any penalties or fees due.
Teams should also account for any applicable local regulatory and governance requirements, including officer and director roles, UBO reporting, annual general meeting requirements, proxy rules, etc.
Developing a framework that meets organizational goals but is also workable for local resources is critical to ensuring the seamless integration of entities and minimizing risk. Any process should get buy-in from key stakeholders, members of the board, corporate secretaries, including directors and officers appointed to oversee local entities.
4. Implementing a robust compliance program
Aside from helping the business meet the goals set out in the transaction, legal and compliance teams must place the newly merged or acquired entity in the best position to address ongoing compliance and risk management.
Critical to this task is establishing a robust and appropriate compliance program. This typically involves consolidating best practices from each company into a streamlined process. With a holistic view of the organization’s compliance status, it’s much easier to conduct risk assessments and ongoing audits so that issues can be quickly identified and addressed.
However, achieving this can be challenging, particularly if an organization has many subsidiaries and entities scattered throughout the world. An efficient process must be implemented that gives resources, regardless of location, access to the information they need to complete daily and annual compliance and filing obligations.
Technology, specifically entity management systems, can assist with this process. But they must be evaluated to ensure they are up to the task. For instance, can the system incorporate new entities regardless of their location? Does it keep track of ongoing obligations and changing requirements around the world? Can it house corporate documentation and act as a secure repository of corporate data? Is it backed by service and support from a provider with jurisdictional expertise?
A truly global entity management system can encompass all entities no matter the location, provide a streamlined view, integrate unique workflows, and act as a single source of truth for the organization.
Supporting your global legal compliance needs
International transactions are complex. But with a strategic post-transaction plan, legal and compliance teams can stay one step ahead of critical tasks and ensure a seamless and compliant transition for the new operation.
CT’s team of dedicated global experts provides services that support your needs during the transaction and after it closes. We ensure your entity management, ongoing annual compliance requirements, and due diligence work are completed and kept up to date in any jurisdiction. With our award-winning, cloud-based entity management software, teams can share data on demand, prepare for audits, stay ahead of compliance deadlines, create organizational charts, improve efficiency, and more.
CT helps manage the operational complexity of global compliance, enhancing internal capabilities – so your key players can get back to adding value.
To learn more about how CT Corporation's Global Transactional Services can help better manage your global compliance needs, contact a CT representative at (855) 444-5358 (toll-free U.S.).
Disclaimer: The information included in this article is meant for informational purposes and not intended to be advice or legal recommendations.