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Corporations & Shareholders
Anyone familiar with a "legal entity rationalization and simplification" probably recalls their first client request to perform this exercise (visualize pages and pages of organization charts, boxes, circles, and checked entities galore). Frequently, this request comes when clients finish an acquisitive streak. However, it is heard more often these days as clients attempt to contain corporate costs and address COVID-19-rclatcd shifts in the supply chain and the like. The legal entity rationalization and simplification exercise is about efficiencies - optimizing a legal entity's organizational structure to achieve cost reductions and management of risks, not to mention keeping a legal entity structure attractive for potential acquisition purposes, too.
First and foremost, it is important to understand the business purposes behind each legal entity. Is this entity housing employees? Is it managing other risks in-country? What role does it play in the organization's supply chain? The entity may have been formed way back when, but is it still useful, based on today's facts and circumstances as well as the organization's future needs? Ask if there is duplication in the organizational structure as a result of the acquisitive streak. Ponder structural efficiencies for repatriation tax purposes, with a focus...