Good Governance – Managing Asia-Pacific Subsidiaries

27 Sep 2018

As the world becomes a progressively more complex global community, companies are increasingly exploring the various interesting and enticing locations that have opened up to them through advancements in technology and economies. The Asia Pacific region is one of the leading locations North American and European businesses seek to establish new operations.

Global companies can be required to establish subsidiary companies in the Asia Pacific to hold assets, for tax purposes, or purely to act as a vehicle for expansion. And with expansion comes numerous exotic and fresh compliance requirements and procedures. Local knowledge and expertise are therefore essential.

Management and administration of an international subsidiary company for the most part includes managing officer appointments and resignations, share capital amendments, address changes, local filing requirements and much more. It is a topic few are passionate about, but one all international businesses must engage with in order to avoid repercussions from the regulator in the form of fines, deregistration, and possible punishment of individual directors.

Setting up a Company in the Asia Pacific

While countries in the Asia Pacific region are not generally the most onerous or laborious of global jurisdictions in which to form companies; businesses entering and operating in the region face numerous regulatory and reporting requirements. For example, Australian law requires the formation of a local company or registration of a branch office before a company may ‘carry on business’. The Australian Securities and Investment Commission (ASIC) regulates Australian companies, financial markets, financial services organisations and professionals. Primarily, ASIC administers the Corporations Act.

ASIC and other local regulators can and will take a hard-line approach to subsidiaries of overseas companies based in Australia. Perhaps logically, as experience shows that subsidiary companies of large multinationals can be neglected by their parent. They can and do become forgotten, lost in complex global structures. Their directors may have left the parent company years ago, the registered address may have exchanged hands and be in use by a completely different business, and there can be substantial fees owing to the local regulator. Such fees are typically the catalyst for investigations to inspect the health and upkeep of a company, and therefore have become one of the key drivers for implementing effective entity management.

Subsidiary Compliance: What should be done?

The ongoing upkeep and management of an overseas subsidiary must involve ensuring that company and director details are up-to-date (change them more than a month after the event date in Australia and you will be fined), addresses are current and that there is a party present to respond to correspondence (fail to respond to a regulator’s notice in Australia and there is typically a fine) and filing deadlines are met (if not…you guessed it, a fine).

Local company secretarial service providers like BoardRoom help to ensure that groups meet their local compliance requirements and can form an integral part of a multinational’s governance framework. The assistance of a local service provider classically involves:

  • acting as the local registered office address and address for service;
  • attending to changes to the share structure, directors, addresses and producing and lodging all the specific information required under local law for these changes (which can and does vary significantly from jurisdiction to jurisdiction);
  • meeting local filing requirements and deadlines with regards to financial statements, annual returns and alike;
  • adhering to deadlines and producing documentation relating to any annual or periodic board or shareholder meeting requirements;
  • ensuring any annual, periodic and ad-hoc fees are paid within their timeframes; and
  • consulting on local laws and regulations.

In addition to carrying out day-to-day administration, local company secretarial service providers like BoardRoom can maintain and update corporate records, which may be in need of a health-check. This involves carrying out a comparison between the company data held by the regulator, the data reflected in the corporate register and finally the date the records should reflect according to the overseas parent. This process is frequently an eye-opener in exposing gaps in subsidiary compliance. Multinational groups can struggle to meet the array of local requirements they are faced with when first establishing a subsidiary company in a new jurisdiction.

Local knowledge and expertise can both add value and decrease costs in novel ways. For example, Australian companies with overseas shareholders are typically required to prepare and lodge audited financial statements. This can, of course, be a costly and timely process. The requirement to prepare and lodge financial reports applies to all foreign owned companies unless a company makes a special application confirming that certain criteria are met so as to qualify for a relief from the rule. This application must be lodged within a specific timeframe in a specific format. The knowledge that a relief such as this is available is often unique to those operating in a particular jurisdiction, and the ability to take advantage of it could save companies money and resources that could be better utilised elsewhere. A competent local service provider should be alerting new market entrants into their jurisdiction to opportunities of this nature.

International businesses are increasingly asking their partners what else they can do for them. As a consequence, the marketplace is responding and local service providers like BoardRoom are evolving their offers to international clients, adopting a one-stop-shop solution and thus making entry into new jurisdictions a simpler process than ever before. Company secretarial, bookkeeping, payroll, tax compliance, HR consulting and nominee directorships and more are now encapsulated in service propositions specifically designed for subsidiaries of multinational companies.

Contact with your Company Secretarial Provider

Much like any corporate services provider, a local company secretarial partner will operate at its maximum effectiveness only when given up-to-date information, and when responses to queries are received in a timely fashion. Company secretarial work involves frequent and often inflexible deadlines. The thorn in the side of the local operator is poor communication, tardiness or a lack of a response to e-mails and calls. By the time the information has been gained and the documentation has been returned, the filing deadline may have passed, meaning the whole task may have to be repeated.

Subsidiary Entity Management: Conclusion

Subsidiary entity management should not be viewed as a burden or simply a box ticking exercise, but rather as a tool for effective information and operational uniformity. However, above all else, embracing subsidiary entity management is, quite simply, good governance.

Contact BoardRoom for more information:

Tom Bloomfield

General Manager, Growth & Partnerships
+61 2 9290 9617