Compliance has long been a cornerstone of good business practice, according to Sarah Colfer. Sarah is director of corporate secretarial and governance services at Mazars and believes good governance is an opportunity-creating factor and not just an obligation.
“Unfortunately, many companies still view compliance as an obligation they must meet, rather than a driver of value for the company. Compliance is something that needs to be at the forefront of people’s minds, and we at Mazars are here to help.”
“We surveyed how business leaders approach global compliance,” said Colfer. “This included where they focus investment, the risks they anticipate and what they expect from ‘good compliance’. The survey showed that when a company does its compliance well, it builds investor confidence, increases client and customer trust, and shapes a positive reputation with the outside world.”
The main purpose of compliance is to ensure entities adhere to the legislative and regulatory requirements in the corporate environment in which they operate. “But the compliance landscape is fast-moving and ever-changing, requiring a team of experts to keep abreast of legislation,” said Colfer.
She said that failure to be compliant could lead to unnecessary risks, particularly to an organisation’s reputation. “We live in a world where information is very accessible without undue cost. All stakeholders including suppliers, customers, investors and shareholders can readily determine the level of compliance of any business. Non-compliance has a huge reputational risk as well as financial consequences.”
“With businesses operating in multiple jurisdictions, compliance is getting harder to manage. The increasing complexity of the legal and regulatory environment creates a major challenge for companies”, said Colfer. So, what approach should companies expanding and operating internationally now take?
“Companies often focus on commercial operations without due regard to the corporate governance and compliance aspects of the business. While a strategic focus is critical, compliance and corporate governance is equally as important. Maintaining an up to date public profile of your business across all jurisdictions is crucial”, said Colfer.
“There are many different rules and regulations and particularly timelines for filing returns in each jurisdiction across the world. Without a focus on compliance, it may pose a significant risk.” Another important issue is ensuring that the statutory records of the entities in each jurisdiction are maintained and kept up to date. “If the register of members/shareholders of each entity does not reflect the current position, it can cause issues particularly in a potential sale of the business. It may even have financial consequences if there are parties that are no longer regarded as shareholders, but are still officially recorded as members in the records for the company.
“Lack of attention to detail in this regard undermines the credibility of the business and, as a consequence, can impact on its value. With that in mind it is important to maintain a solid share history that is documented very clearly in board minutes and updated into the statutory register.”
“Maintaining a record of the entities in each jurisdiction is critical for businesses operating internationally. Sometimes companies can forget that they have entities in different jurisdictions because they are so focused on their core business.” Annual returns need to be kept up to date and financial statements need to be filed.
“The consequences of not doing this are often severe, companies may be struck off or fines and penalties levied against the company and/or its officers. With international expansion and the incorporation of entities in various jurisdictions, it is important to fully understand the ongoing compliance requirements and filing deadlines.”
Colfer said that it is important for separate board meetings to be held for each entity and the decisions of the board of each individual entity recorded in the minutes of the meeting. “Decisions concerning subsidiary entities may be discussed and agreed at the group board level, but it is important to consider whether certain decisions need to first be discussed and agreed at subsidiary level. This may require a meeting of the board of more than one subsidiary company in another jurisdiction.”
Companies struggle with international compliance, so we provide our international clients with a global platform which allows full visibility of compliance obligations across all jurisdictions. “Clients find the system very easy to navigate, compliance is assured, and the administrative burden is significantly reduced,” explains Colfer.
“How a company is supported on its global journey is vital. Having one point of contact who becomes a trusted partner that understands the company strategy and can act as a sounding board on compliance issues across various jurisdictions is extremely beneficial.
“At Mazars, we act as that single point of contact to coordinate compliance, not just in Ireland, but across the globe. We are located in over 90 countries and our clients are businesses of all sizes, from small domestic companies to large multinationals.
“Legislative changes can creep up on people and it can be hard to keep on top of them all, especially if your company spans multiple jurisdictions. Ensuring compliance with an ever-expanding set of rules and laws is costly, resource-intensive and requires local knowledge. Our global compliance service is designed to help you ensure good governance by meeting your specific obligations,” she said
This article first appeared in The Business Post, April 3 2022