ACC in collaboration with Deloitte 2022 Legal Entity Management Report

The Association of Corporate Counsel (ACC), in collaboration with Deloitte, released the first edition of “An Inside Look at Legal Entity Management Practices.” With over 500 organizations responding, this report provides a detailed analysis into legal entity management, also known as subsidiary governance. Among a number of key findings in the survey, the results clearly show organizations that implement a majority of LEM leading practices experience more effective and efficient business outcomes than those who do not.

“While many organizations have subsidiaries, this report shines new light on the fact that most do not have solid and consistent policies and practices in place to manage their governance,” said Blake Garcia, Ph.D., ACC’s Senior Director of Business Intelligence. “With significant risk and tax implications, often in multiple jurisdictions, ensuring a solid LEM function is a critical component for organizations to manage their risk. We are excited to collaborate with Deloitte on this unique survey and hope it provides significant value to ACC’s members and others to help identify and strengthen their LEM policies moving forward.”

“Given the current landscape of heightened compliance and reputational risks that organizations face, effective legal entity management has become a focal point,” said Michael Rossen, managing director, Legal Business Services, Deloitte Tax. “This report provides insight on how organizations are managing their legal entities — as well as potential opportunities on how to strengthen the LEM function. We are thrilled to have collaborated with ACC on this survey to provide the in-house community with a relevant resource on legal entity management.”

Survey results show that most respondents face extensive challenges regarding compliance and regulatory obligations related to subsidiary governance, resulting in higher risk for organizations.

Additional key findings from the report include:

  • Focus on LEM is growing – 22 percent of participating organizations expect to increase the number of staff dedicated to LEM, while 39 percent report increases in budget for LEM over the past year.
  • Consistent LEM policies are still lacking – most companies reported not having specific LEM policies and practices in place, while 56 percent do not conduct internal LEM-related audits or regular monitoring.
  • Technology to manage LEM widely used, but most dissatisfied – 60 percent of participants reported using an electronic database to track corporate records. However, 73 percent said they are dissatisfied or neutral with their current technology.
  • Competing priorities and lack of bandwidth are the main challenges faced by 71 percent and 49 percent of LEM teams, respectively – additionally, 40 percent said they struggle with inconsistent processes and 31 percent indicated that their LEM processes were antiquated.