Legal Entity Management: Why is it Important?

Now, perhaps more than ever, private equity firms are being asked to do more with less. With the significant growth in asset inflows and the extraordinary pressures created by the COVID-19 pandemic, treasury teams are faced with increasing pressure. With vast numbers of staff working from home, there are additional challenges to face, with a small number of resources at hand.

Proper Legal Entity Management requires synchronization and control around an organization’s regulatory compliance, administrative maintenance, fund relationships, investor governance and record-keeping – which can be a complex exercise due to the numerous departments, processes, systems and responsibilities involved. It is this complexity that causes legal entity management to become an operational obstacle vs. a strategic asset.

Even in this modern world of rapidly advancing technology, companies are still mostly relying on a combination of spreadsheets, databases and paper files to keep their crucial entity data up-to-date and accurate.

So, how do you get your in-house treasury team to do more with less?

By getting entity management right, you decrease operational and compliance risk, reduce the need for remedial action and save yourself from the negative reputational and commercial implications; re-focusing all your efforts on the task at hand: return on investment.

Best practice legal entity management can deliver cost savings by:

  • Easily gathering, organizing and publishing the correct compliance data the first time
  • Avoiding the need to update multiple internal systems
  • Proactively creating a collaborative environment across multiple departments (i.e., Accounting, legal, tax, treasury, etc.)
  • Streamlining investor notices
  • Understanding “true” assets and liabilities based on the legal entity framework and relationships with other fund structures (i.e., co-investment, joint venture, etc.)
  • Integrating the formalized legal entity structure into other value-added tasks (i.e., cascading cash, projection management, covenant monitoring)
  • Reducing the time spent identifying and fixing mistakes will significantly save time and money in the long run

Automation and consolidation for legal entity management allow companies to reap tremendous benefits and lessen the impact of future potential challenges. Leveraging technology to effectively managing your legal entities will fundamentally boost the efficiency of your entire organization, thus freeing the team to spend less time on administrative exercises and more on strategic initiatives, which always translates into increased value to your business.

Do you need help with Treasury and in particular Cash management? See how Hazeltree can help you.