Entity Management Matters

Put simply, common law systems derive from the traditions developed in England from the 12th century while “civil law” systems derive from Roman law, mediated through French law (especially the Napoleonic codes) and German law. The US – except parts of Louisiana law – falls into the “common law” category.

 

The distinction has a direct impact on how multinational corporations handle their subsidiaries. In short, civil law jurisdictions tend to require shareholders to hold an annual general meeting (AGM) to confirm the entity’s annual financial statements; in common law jurisdictions, AGMs tend to be optional and will happen infrequently, when shareholders need to approve a significant decision.

 

The statutory requirement to hold AGMs applies to wholly-owned subsidiaries of large corporations too. It means that a US-based multinational with operations around the world will need to hold dozens or hundreds of AGMs every year. Often these meetings happen only on paper, i.e. the group’s representatives can execute meeting minutes in lieu of actually attending a video call or an in-person meeting. Nonetheless, the documentation must be prepared and usually requires a lawyer to have a look. In many countries, the minutes need to be filed with the local governmental company registrar and additional documents may be required, such as a confirmation from the auditors.

 

These requirements are relatively straightforward but when you have dozens of entities across 50 different countries, they add up. They are also compounded by the minute differences in language and legal systems, meaning that templates and procedures will differ even between countries that are otherwise closely aligned (e.g. Belgium vs the Netherlands or Argentina vs. Chile).