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Modernizing corporate governance processes to fit the digital age
Flexible legal regulations introduced during the COVID pandemic saw multinationals reduce the time spent on managing their entities over the past year by almost a fifth (17%), according to the latest report published this year by Mercator® by Citco (Mercator) as part of the ‘Entity Portfolio Management Report Series’.
Findings from our Mercator Entity Management Report 2022 show that, on average, Europe is the cheapest region for multinationals to base entities. This is due to the permitting of digital filing processes for corporate related actions.
Pre-pandemic adoption of simplified and digitalized processes including online filings, counterparts, virtual meetings and e-signatures reinforced APAC’s position as the quickest region to operate – with the average time for completing activities reducing by 21% compared to last year.
Ranked per individual jurisdiction, Bermuda emerges as the most favorable location overall in which to base entities in 2022, followed by Luxembourg and Germany. All three jurisdictions have the ideal combination of low-cost levels and competitive timelines, and are well regarded as global financial centers, with competitive legal markets and long-established corporate governance processes.
Bermuda scores favourably due to a range of factors including the availability of electronic filings, wide acceptance of e-signatures, ability for service providers to act as a company secretary and the fact that in most cases, corporate changes can be approved internally without any requirement to file with the authorities – all of which streamline activity.
Luxembourg’s wide-ranging use of e-signatures, attractive legal framework and business-friendly policies propelled the jurisdiction into the top spot for speed of business in 2022 – up from 16th place last year. Another factor adding to its shorter timeframes is that entities in Luxembourg have tended to rely more on local directors and other local representatives for Corporate Secretarial support since the pandemic.
The People’s Republic of China ranks lowest when combining cost and time, followed by South Korea and Taiwan. All documents must be translated into local languages and multinationals face complex regulatory environments, with often-detailed local requirements to complete changes. These three jurisdictions also have decentralized local authorities; to complete just one change, this means that companies will have to make several filings to different governmental institutions.
As multinationals continue to modernize company processes to fit this new digital age and stay ahead of the ever-evolving regulatory landscape, we hope this data will serve as a benchmark for their expenditure and efficiency – while supporting in-house counsels on evaluating the management of their entities. It will also provide internal stakeholders with the assurance that each entity is properly managed and compliant.
Kariem Abdellatif
Director of Citco Mercator, UAB, Head of Mercator by Citco