Entity Management Matters

Implementation, however, varies tremendously from one jurisdiction to the other. The big differences in legal systems (e.g. civil law vs. common law) play a role here but mostly this is about contingency.

 

There is no clear, objective reason why annual reports have one name in Arizona and another in Delaware when their contents are almost exactly the same. Similarly there is no reason why the abbreviation for “société à responsabilité limitée” reads “SARL” in France but “Sàrl” in Switzerland.

 

Many of these differences also come down to the vagaries of bureaucratic ingenuity: must you file 3 or 4 copies of your board resolution? Do you need to fill in a form or write a free-form letter? No clear reason there either.

 

Other variations are more fundamental and derive from a government’s attitude to risk: should minority shareholders be protected against the majority? Can tax collectors trust management or should they have a document from the shareholders confirming the entity’s financial results?

 

In many civil law jurisdictions, the answers to these questions are “yes” and “no”, meaning that statutes require shareholders to hold an annual general meeting (AGM) every year to confirm the financial statements. 

 

Whatever the reasons, these variations create a huge headache for multinational corporations handling dozens or hundreds of entities across the world. The corporate secretary and/or General counsel must take stock of the bewildering variety of corporate forms and compliance requirements to come up with a defensible, reliable mechanism for global corporate governance.