Entity management cannot be defined in a sentence or two because it's a complex system that involves many people and processes for each entity. The complexity of legal entity management is precisely why many corporations fall down on the job when it comes to managing all aspects of the corporation and it's entities, sometimes getting themselves into trouble with compliance matters. Before we get into a definition of entity management, it helps to define the term corporate record. A corporate record is a set of information that details any and all changes to the business, particularly mergers, acquisitions and changes to the corporation's name, legal structure, owners, directors and other pertinent information.

What is Legal Entity Management?

Legal entity management involves a corporation's governance, compliance and legal departments. Most, if not all, subsidiary management duties include regulatory compliance, administrative maintenance, monitoring of insider trading and internal record-keeping. These departments manage the inflow and outflow of information, reports and documents that inform the corporation's transactions and filings. In addition to significant internal corporate departments, many important corporate employees like managers, board directors, audit committees and regulators make requests for corporate data regularly throughout the course of the business week, which complicates the tasks of the department secretaries even further.   The complexity of managing today's entities is causing many corporations to look for cost-effective ways to meet the demands of compliance under the law. Outsourcing entity management is becoming a viable and popular way to manage their entities efficiently and effectively. In the world of modern governance, having the right tools, insights and analytics is the only way to get a competitive edge to remain compliant and ensure all entities are following local jurisdictions.

Corporate Secretaries and Paralegals Need Entity Data in Real Time

Corporate secretaries and paralegals get bogged down with requests for hundreds of documents every day, many of which are time-consuming to access because they are heavily encrypted and have unique data points. More importantly, they need much of the data in real time, which isn't possible in many cases, unless the company has sophisticated systems. Corporate secretaries also play an important role as advisors, so having a formal system gives them faster access to important documents and data.

The Breakdown of Information Management Requirements

Because many people, departments and processes need or manage corporate data, in the absence of an electronic subsidiary management system, it helps to assign which people or departments are responsible for maintaining certain pieces of information. Every corporation has unique operating needs, so this outline will vary from corporation to corporation. In order to better understand how organization's better meet the modern entity governance challenges, it is helpful to get a breakdown of how documents and duties could be assigned throughout an organization. Compliance Department The compliance department is typically responsible for tracking the management structure, capital structure, ownership and delegation of compliance duties. The compliance department also maintains filing deadlines and files annual reports. Staff in this department will understand how to report on ownership and other processes to complete SEC Section 16 filings for directors and officers. They also maintain charter documents and other information on entity formation and dissolution. Most importantly, the compliance department monitors and records officer and director trading activity and everything that pertains to SEC compliance. Governance Department The governance department is usually responsible for tracking activity according to the various cycles and maintains documents for reporting, audits, cybersecurity and future corporate actions. This department provides oversight for the full corporate database to make sure the corporation is following corporate secretarial procedures. The governance department manages the compliance calendar for filing due dates and the meeting schedules for shareholders, board directors and committees. They also maintain minutes of all meetings and resolutions and supply reports upon request by relevant stakeholders. Board of Directors The board of directors records minutes of board and committee meetings. The minutes may be maintained by the board, the governance committee, or both. The board should also maintain reports to show that the board and management are aware of important governance matters. The board maintains consents and other documents to meet state compliance regulations. The board should also have documentation that proves they are managing risk and supporting corporate transactions appropriately. The board secretary should keep an up-to-date list of addresses and contact information for all directors, officers and other important people for meetings and other needs. Management In addition to managing daily business activities, management is responsible for providing ownership information for mergers, acquisition, business contracts, internal business processes and managerial review. Management teams also need to provide reports for tax, finance and other departments.

Benefits of Outsourcing Entity Management

There are many benefits to outsourcing legal entity management. Software programs develop a system of storage, cycles and notifications. These systems allow multiple parties to access the information they need, while disallowing users who don't need access to information. Corporate secretaries and paralegals can allow access to tax, legal and compliance personnel, as well as outside counsel, auditors and board members as needed. Software systems provide responses in a strategic manner while keeping costs at bay. Automation alleviates some of the intensifying compliance and regulatory pressures related to human error. Multifaceted systems manage the complex needs much more efficiently and accurately than multiple staff in multiple departments can do on their own. Software engineers work with corporations to customize entity management systems according to their needs. While there is an investment in the system and in managing the system, corporations will realize savings with higher quality, timely compliance and increased oversight, without hiring additional staff to manage these tasks.

Understanding Why Legal Entity Management Is a Growing Field

The financial crisis sent regulatory bodies scrambling in search of new regulations to protect investors. Scandals also threw board directors and managers into a whirlwind as they sought to take a more in-depth approach to understanding the risks and challenges that their corporations were facing. Across the board, we learned that board directors had become complacent, and in some cases, downright lazy. Along with new regulations, the financial crisis drove an enhanced set of best practices for corporate governance. Boardroom agendas are filled with items about the increasing number of issues that board directors must evaluate to protect themselves, stakeholders and investors. Corporations have never been more committed to being informed to avoid financial and reputational loss. Many of them are finding that the investment in entity management is a tool they can't live without.