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Global study ranks jurisdictional compliance challenges for in-house legal teams

The latest global study from TMF Group provides valuable information on company secretarial compliance for in-house teams and ranks countries according to business complexity from a regulatory and compliance perspective

16 February 2016

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The Global Benchmark Complexity Index 2015 shows that new compliance requirements are adding to an already long list of duties and obligations for corporate secretarial and in-house legal teams. It identifies two main factors that drive an increasing level of compliance activities:

  1. The majority of governments are adding additional layers of compliance to corporates by demanding more information on corporate structures and activities; and
  2. The increased level of interconnectivity between governments (to increase their effectiveness in combatting money laundering and other illicit activities) means they are seeking accurate information across a multinational’s group structure.  

According to the report: ‘The uncertain economic environment coupled with an ever-increasing compliance workload means that in-house teams are often unable to cover adequately all areas of compliance. As a result, resources need to be deployed carefully.’

Overall, the study condenses country-specific corporate secretarial complexity into a measurable benchmark over 95 jurisdictions across Europe, the Middle East, Africa, Asia-Pacific, and the Americas, with insight into why certain jurisdictions are more complex than others. Headline results from the study show that:

  • Argentina ranks as the most complex country for the third year running;
  • Ireland ranks as the least complex, highlighting its business-friendly reputation;
  • In the top 10, Argentina is joined by four other LatAm countries, as well as Asian countries including Indonesia, China, and Thailand;
  • Three European countries fall into the top 20 most complex destinations for doing business in, namely Hungary, Poland, and Switzerland; and
  • The UK comes in 74th and the US ranks as 56th.

According to experts at TMF Group, many of most complex jurisdictions share certain characteristics not linked to a specific region. For example, with the exception of China and the UAE, all other jurisdictions in the top ten have a civil rather than common law-based legal system. The experts at TMF Group highlight that the development of these legal systems have been plagued by limited investment and the lack of necessary legal infrastructure to support a robust corporate governance environment.

In comparison, Ireland, as the least complex jurisdiction, benefits from a stable political environment and a strong legal framework.  Of particular note was the introduction in 2015 of a new Companies Act designed to simplify its business environment even further. This, alongside other recent initiatives, has ensured the country remains one of the most popular destinations for international business.

Matthew Eckford, a director at TMF Group, commented on the findings by saying: Multinationals have to deal with an ever increasing regulatory and compliance burden, as they manage their presence in multiple territories or expand into new regions.  Boards of directors face mounting pressure from many governments, who are creating additional layers of compliance as they continue to demand that companies provide them with more information about their activities and corporate structures. This can cause major headaches for in-house teams who do not have sufficient knowledge of local regimes and their potential pitfalls.’

This study should prove useful for in-house teams who are looking to predict where challenges with annual company secretarial compliance will lie, and they can use it to assess legal needs in those jurisdictions – particularly if expansion is on the cards for the organisation.

Law firms should also find the results of use when working with multinational clients.

Categorised in:

Risk & Compliance In-house