International Entity Compliance Must Dos in 2020 and Beyond
ComplianceApril 27, 2020

International Entity Compliance Must-Dos in 2020 and Beyond

Global expansion offers many opportunities for businesses but keeping an international entity in good regulatory standing doesn’t come without its challenges. When managing a global entity, not only must you stay up to date with the legal responsibilities that come with operating in multiple countries, you also need to stay on top of in-country compliance requirements (which can change frequently) and establish good governance.

With that in mind, let’s take a look at the challenges of international entity compliance and the important steps you can take now to overcome them.

Understanding local compliance requirements

When a business pursues international growth, new compliance requirements need to be considered. Failing to understand and manage these widening responsibilities can create greater financial and reputational risks as organizations are exposed to a broader range of penalties including fines, inability to conduct business and in rare instances imprisonment. This makes it essential for companies to have insight into the local laws, rules, and regulations for every jurisdiction in which it operates.

Common activities that may be included in the annual compliance cycle include:

  • Preparing and submitting statutory corporate secretarial reports.
  • Submitting annual financial statements to the local registry, court, or chamber of commerce.
  • Annual meeting minutes and resolutions to approve annual financial statements by directors and shareholders.
  • Routine approvals involving the re-election of auditors, directors, and officers.
  • Providing related document execution guidance to directors.
  • Facilitating notification and ongoing maintenance of entity related information in local registers, for example, significant controller registry, ultimate beneficial owner registry, or similar.
  • Initiating timely payment of registration or license fees in order to keep subsidiaries or branches in legal good standing.

Much of this work may sound familiar; many legal counsels find that 80% of global entity compliance work remains the same. The challenge is, however, having visibility to the unique compliance requirements from each jurisdiction. Ultimately, having global expertise is key to minimizing the risk of costly errors.

Plan ahead with a compliance calendar

A great way for businesses to keep a handle on key compliance tasks year-round is to create a compliance calendar. Compliance calendars help keep tasks organized, tracks due dates and can send alerts and reminders ahead of a deadline.

To ensure a compliance calendar is effective, it is imperative to include the necessary data as it becomes available in each country. Therefore, any new filing requirements, deadline changes or changes to a company’s local operational status along with the corresponding compliance tasks, must be reflected and updated accordingly. Another important action, that may sometimes be overlooked, is to include Know Your Client (KYC) requirements on the calendar. Businesses should also account for any unexpected delays and their impact on ensuring compliance deadlines are met.

Once formulated, make the compliance calendar available to all stakeholders that participate in annual compliance activities, from within the relevant jurisdiction, to those at the parent company.

KYC Checks

KYC (Know Your Client) laws are rapidly evolving and are designed to prevent financial crimes such as money laundering, tax evasion, and bribery. While KYC laws vary from country to country across countries, companies must ensure local regulations are being followed while also complying with U.S. directives.

To achieve this, companies doing business globally should plan on conducting a KYC check on clients, partners, and suppliers on a regular basis so that the organization knows that who it is does business with is who they say they are. These include checking identification and other pertinent documentation, screening sanction lists, reviewing Ultimate Beneficial Owners (UBO), and if there are any politically exposed persons (PEP), etc.

Performing these checks ensures there is a sound plan to verify the identity of customers, clients, and suppliers and minimize the legal risks to an organization as it transacts business overseas.

Regularly report changes to an entity’s governance structure

Properly updating changes to an entity’s governance structure is one of today’s biggest compliance flaws.

It’s imperative that global companies keep Ultimate Beneficial Owner (UBO) information up to date and ensure visibility of where directors serve is made known to local authorities. Identifying the board of directors based on the details required by local regulations and reporting any changes is essential. Having an outdated listing of directors is a significant liability. Most countries have a timeline for companies to report any director changes, and a failure to do so within the allotted time can result in fines. On average, it is 20 times less expensive to report or change a director than the cost associated with non-compliance. Additionally, the nationality of a director may have its own repercussions, so it is important for companies to understand the in-country requirements for executives and legal representatives.

Utilizing the directorship services of a trusted global compliance provider is in many cases a good idea, especially if a company doesn’t have individuals that meet the local directorate requirements.

Check public records against internal records

In some countries, directors can be personally and criminally liable for any misinformation and non-compliance. So, in order to maintain good standing with local authorities, companies must get into the habit of reviewing their entity’s public records with those they maintain internally. Regularly pulling a good standing report, credit checks and/or entity health checks, etc., allows businesses to address any discrepancies in a timely manner and helps avoid non-compliance which can translate into hefty fines in many countries.

Expert Insights: Have you done a compliance health check for your global entities? A health check verifies the compliance status of entities operating internationally. Read more about what’s involved in the article Global Entity Compliance Starts with a Health Check.

Leverage technology to fulfill compliance requirements

Technology can play a vital role in streamlining the compliance process of a global entity. Global entity management software can aid in handling all the legal obligations and compliance tasks for one or multiple entities, as well as act as a central repository for entity data, and make it easy to find, update, and share across an organization in real time. It helps monitor the status of each entity and notifies if there are any new requirements and status changes as well as relevant regulatory updates.

Because everything is centralized in one system, companies will have more control and visibility into their global compliance obligations across multiple jurisdictions and stay one step ahead of important deadlines. In addition, by automating non-essential and time-consuming tasks, companies can realize significant efficiencies and reduce workloads.

While technology can help scale a company’s global entity management efforts, to make it an even more effective tool, the latest and most accurate data must be fed into the system on a consistent basis. Leveraging the expertise and know-how of global compliance experts helps to seamlessly integrate new information on local regulations and relevant jurisdictional obligations, making it readily accessible and always current.

Work with a provider with local expertise

Compliment your technology investment with local expertise. Local laws and regulations change often, and it can quickly become complex to manage routine compliance requirements and standard activities without a single point of contact. Indeed, on the ground experts can help you stay on top of changes in local legislation that may apply to your organization. They can also assist in ensuring the best possible compliance outcomes for your global entity.

Look for an experienced and trusted partner who speaks the local language, has experience dealing with local authorities, and understands the culture. A partner who knows the best way to manage the day to day work, can guide you through complex requirements, and help define the best path forward when things get complicated – saving time and lowering risk.

Conclusion

As you review and plan your international entity compliance must-dos for 2020 and in coming years, set yourself up for success by adopting a global entity management approach that reduces complexity and makes ongoing compliance needs easy to manage. By understanding what the local requirements are, setting up a compliance calendar, regularly performing KYC checks and reporting any governance changes, ensuring public records reflect those managed internally, and having the right technology in place to coordinate compliance from the U.S. in a centralized system, backed by the expertise of a trusted global provider, companies can proactively manage recurring tasks and control all aspects of their global operations – in every country and for every entity.

Let CT take the complexity out of your global compliance and gain the confidence to act quickly in any country you do business by trusting the hard work has been done right. To learn more about how CT can help you better manage your global compliance needs, contact a CT representative at (855) 444-5358 (toll-free U.S.).


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