The Role of Paralegals in Legal Entity Management

Entity management is a method of integrating corporate duties like regulatory compliance, administrative maintenance, monitoring of insider trading and internal recordkeeping activities. It involves an organization's governance, compliance and legal departments, who manage the flow of information in and out of a company, as well as producing documentation and reports that can inform every transaction and filing.

The conversation around legal entity management (LEM) as a specific subset of entity management science grew to a whole different level back in 2013, when the Organization for Economic Cooperation and Development (OECD) adopted its Action 13, which included a number of new rules for implementation of country-by-country entity reporting in order to start getting a handle on actions that were deemed profit-shifting to avoid taxation, which contributed to the erosion of the individual OECD countries' economic bases.

Since then, we've seen Brexit, which has forced companies to establish legally distinct entities at the British and European levels, and President Trump's tax law, which commits the U.S. federal government to cracking down on profit-shifting like never before. These and other major policy shifts in a climate of global political turbulence make developing a specific legal strategy for entity management incumbent on multinational organizations. This post is meant to break down some of the basics of such a strategy.

Legal Entity Management

Legal entity management, as distinct from the rest of the operations that constitute an entity management strategy, are the processes that handle regulatory compliance and administrative maintenance on an ongoing basis, particularly the functions typically handled by the legal, compliance and/or governance departments. Financial regulations in the US, Europe and worldwide enacted since the financial crisis of 2008 imposed new recordkeeping and reporting requirements. These rules have greatly increased the scope and complexity of what organizations are expected to monitor and report on to their leadership, governments and shareholders.

For example, it's normal for the legal department of a multinational company to be engaged in fielding dozens of requests in a single day about the details of ownership for international entities ' for example, when leadership is planning a reconstruction or expansion. Legal entity management keeps all this data in one place, at the fingertips of the people who need access to it. It also helps companies stay up-to-date on their fiduciary, regulatory and statutory responsibilities, gives the leadership advice on the best practices of corporate governance, and actively maintains the corporate record of all transactions, filings, reports and audits.

Aspects of a Strong LEM Strategy

Three essential prongs of a sound strategy for LEM are ensuring compliance, risk management and valuation of the legal team.

  1. Ensuring compliance: Legal entity management brings all corporate filings together, in addition to registrations of assumed business names and foreign authorizations, special licenses and permits, and documents for maintaining tax status. General counsel, corporate lawyers and paralegals should be able to access all of these filings for every national and subnational jurisdiction from a single repository.
  2. Risk management: The purpose of creating separate entities within a multinational organization in the first place is to isolate potential legal liabilities to discrete bodies. This is what's called the 'corporate veil.' Managing legal risk entails both keeping the veil intact and implementing the best practices to identify and mitigate liabilities.
  3. Valuation of legal teams: Legal departments of multinational enterprises almost invariably complain of being overworked and understaffed compared to what's asked of them on a daily, ongoing basis. LEM strategy to share and analyze data helps legal departments to 'do more with less.'

The Role of a Paralegal

Gone are the days when the production of all the legal documentation needed in business would be routed through the single figure of the corporate secretary and/or general counsel. It's more common today for the legal departments of large firms to employ armies of paralegals, who, no matter how many they are, struggle to field the constant requests for information from other departments and outside agencies and to keep up with the demands of contracts and compliance.

Corporate paralegals are required to have exceptional organizational skills, strong written and oral communication skills, and the initiative and ingenuity required from their employers in sorting out the complicated legal details of mergers and acquisitions, governance, compliance and so on. Just a few of the areas paralegals can focus on, and excel in, through your legal entity management are:

  • Intellectual property
  • Maintenance of corporate records
  • New entity formation and filing
  • Licensing and regulatory liaising
  • Litigation
  • Real estate closings
  • Contract management

How Software Can Help

A reliable software platform is the essential basis for effective monitoring and response to legal responsibilities and risks. More and more companies are turning to outsourced software solutions in entity management, generally because they don't want to spend time or money reinventing the wheel.

Software programs for legal entity management are developed systems for storage, cycles and notifications. They allow multiple parties to access the data they need while assigning permissions based on rank and responsibility. A customized platform that automates legal compliance reduces the risk of human error, helps legal and leadership teams work together more effectively, and realizes higher savings and quality in the long run.

In trying to sort through and master all the different kinds of data that they deal with on a daily basis as part of a strategy for legal entity management, it might be easy for your organization's paralegals to feel like a modern version of King Cnut, commanding the sea of documents and filings that make up modern business to retreat from the shore.

But it doesn't necessarily have to be this way. A good entity management platform can automate a great deal of the grunt work traditionally foisted on paralegals. Through the automated creation and approval of contracts, filings for compliance and so on, you can lift a huge burden from the shoulders of your paralegals, saving time that they can use to focus on more complex and higher value-generating activities.

These and many other features are offered to customers of Blueprint OneWorld's entity management platform. Please call or email us today so we can start putting it to work for your organization.