Why a simple director change is not that simple at all
It happens every day in multinational corporations. People are recruited in management positions; they move from one country to another to take on a directorship; or a director leaves the organisation. While these events are commonplace they all involve changes in the management and board composition of legal entities, which need to be structured and processed carefully and accurately. This process becomes even more complex if directors in foreign legal entities in multiple jurisdictions change, which can typically happen after a merger or when management responsibilities for overseas regional businesses are transferred.
A process-driven approach is key to ensure the accuracy and timeliness of filings. In most cases, this process starts by drafting the required internal governance documents (in many cases board resolutions) to ensure that changes in director are approved in accordance with statutory and other requirements that apply in the entity’s home jurisdiction.
Once these corporate governance requirements have been satisfied, these director changes must be filed with government authorities in overseas jurisdictions. Many of them require registration of directors, often on a public register. This public registration will include the name and address of the directors, but nowadays in many cases also other personal information that overseas jurisdictions require for anti-money laundering purposes (passport copies etc.) where previously that might not have been the case. In certain cases, attention must be given to special qualifications that are needed to be eligible to act as director. Also, some jurisdictions have specific licensing requirements that apply to staff appointed as directors. From a risk management perspective, the business must make sure not only that new directors are registered properly, but also that the people whom they replace are properly de-registered (especially where these directors have left the organisation and no longer represent the business).
Finally, the multinational’s entity management software system must be updated to ensure that all internal stakeholders (the offices of the Corporate Secretary and General Counsel, as well as Human Resources and Tax) have been informed and the accuracy of the database has been preserved.
The Citco GSGS team is expert in the field of process-drive approach.