Many companies operating globally have a small corporate secretarial function to deal with a large number of legal entities around the world.
Whilst the principle of maintaining legal entities may seem simple, the process can vary significantly in emerging markets. Companies face major hurdles including extreme diversity, a lack of digitization, responsiveness issues and reputational risks. Considerable fines and reputational damage are the likely fall out if entities are found to be non-compliant, or even worse, if illegality is discovered.
Emerging markets can be more challenging in terms of digital infrastructure, connectivity and institutional reforms. Sub-Saharan Africa is a region which is representative of the challenges faced in emerging markets when trying to set-up and maintain legal entities. Companies present in the region can face a series of hurdles:
→ The variety in types of legal system adds complexity whenworking in developing countries;
→ Language is one of the most obvious challenges when conducting business in emerging markets;
→ Operating in common law based jurisdictions is likely to feel familiar in spite of regional differences. Yet setting up and managing anewentity in civil law jurisdictionsisfundamentally different;
→ Annual compliance checklists come in all shapes and forms in emerging markets and Africa is no exception;
→ Access to connectivity remains expensive in many places, digital infrastructures are not always reliable and bandwidthavailability may be low;
→ Getting things done in a timely manner can be a challenge in some jurisdictions;
→ Although progress is made daily, high levels of corruption still plague some jurisdictions.
Corporates tend to make more informed choices as they grow and mature. However, initially many organisations need to put something in place quickly to meet the demands of the business. As such, companies operating internationally often cycle through different options before reaching the optimal solution.
There are five main options to manage legal entities in emerging markets:
1. Trying to undertake the work in-house from head office;
2. Using operationalresourcesin-country (i.e. non-lawyers);
3. Employing in-house lawyers in-country;
4. Relying on a panel law firm with a partner network;
5. Using a specialist corporate secretarial provider.
The White Paper on Managing Legal Entities in Emerging Markets sets out the key issues companies routinely face when managing entities across several continents, along with a case study focusing on Sub-Saharan Africa. The White Paper is available for download free of charge at www.kalexius.com.
