According to a legal entity management survey by the Association of Corporate Counsel and Deloitte Tax, over a quarter (26%) of organizations reported that some of their corporate entities have fallen out of good standing with regulators in the past two years. Furthermore, 9% of survey respondents stated that a corporate entity's delinquency had affected a business transaction. The report also revealed that the top pain points in corporate entity management include having too many competing priorities (62%), a lack of bandwidth (49%), and inconsistent processes (37%). The survey included 467 organizations from 20 industries across all global regions.
According to a 2023 legal entity management report by ACC and Deloitte, many organizations are at risk of non-compliance due to a lack of subsidiary governance policies, procedures, and processes. For instance, 25% of organizations still need an official approach for updating company records, while 27% and 31% lack processes to monitor annual compliance obligations and enable effective subsidiary governance. This lack of robust governance programs is causing disruptions and affecting business transactions, leading to organizations falling out of good standing with regulators. However, the report notes a positive development, with the percentage of organizations without an annual compliance calendar dropping from 38% to 30%. Two-thirds of participating companies have official LEM policies, procedures, processes, or controls, with Microsoft Excel being the most commonly used technology. However, only 30% of those exclusively using Excel are satisfied, while two-thirds of respondents using a formal entity management platform expressed satisfaction. Almost all respondents had someone from their legal department on their legal entity management team, and 48% had a compliance professional as a team member, while members of governance, finance, and tax teams were also involved.
According to the 2023 legal entity management report, approximately two-thirds of organizations reported having one to three individuals on their legal entity management teams, while 25% had four to 10 team members. Only 9% had more than ten individuals handling these responsibilities, with larger companies tending to have larger teams for this work. Most organizations (79%) anticipated keeping their legal entity management staffing levels the same in the next year, while only 14% expected to increase staffing levels, a decline from the 22% who anticipated doing so in the previous year. The report attributed this decrease to concerns about the economic prospects for 2023 and beyond, which have affected hiring in all legal department positions. However, those who expected to increase hiring cited reasons such as the changing regulatory climate, company growth, and an increased number of entities to manage.
