Managing Legal Entities
Tracking corporate
information with the latest Web-based applications.
By Cary
Griffith
November/December 2006 Issue
Throughout the past two
decades, corporate law offices have undergone a quiet revolution.
Increasingly sophisticated technology and a much more stringent legal
and regulatory environment now provide paralegals with some wonderful
opportunities. Many new job prospects involve employment in a section of
corporate legal departments that goes by many names, including the
office of the corporate secretary, legal entity management, the
corporate secretaries group and corporate compliance management.
Like the names of their
departments, the corporate paralegals who help run these offices have a
variety of titles: corporate records administrator, financial analyst,
senior corporate government specialist and manager of corporate
information. But the diversity of names and titles doesn’t alter these
offices’ and experts’ functions — the total management of their
companies’ legal entity information.
Understanding Legal
Entity Management
The lifeblood of legal
entities are documents and the information they contain. Articles of
incorporation announce a corporation’s birth. Bylaws, in part, explain
the rules of its governance. And from the point of its origin until the
corporation is dissolved, merged, bankrupt or in some other way ended, a
variety of documents track every step, stumble, leap and fall of the
company’s existence, however brief or long it is. Documents and the
information they contain also are the lifeblood of every other type of
business organization, including partnerships (both general and
limited), joint ventures, limited liability companies, wholly owned
subsidiaries and company divisions.
If documents are the
lifeblood of legal entities, the brain and heart reside in a company’s
legal department. Typically, that is the office of the corporate
secretary, although as mentioned, it can be called various names. Those
who work in this office create, track and manage a legal entity’s
documents and related information.
Few corporations spend
money on what typically is considered overhead unless there is a good
business reason to do so. Today, federal and state governments provide
companies with that reason. In the wake of accounting scandals such as
those at Enron, MCI and Tyco, Congress passed stringent new laws,
including the Sarbanes-Oxley Act of 2002. SOX introduced significant
changes to corporate governance and disclosure regulations (see
“Sarbanes-Oxley” January/February 2006 LAT). More specifically,
according to the act’s introduction, SOX promulgated new rules designed
“to protect investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the securities laws.” The changes
in the law were dramatic.
Unfortunately, the U.S.
Congress and federal agencies didn’t end their administrative and
regulatory efforts with SOX.
Pat Tisdale, senior
corporate governance specialist with the Oklahoma City-based Devon
Energy Corp., an oil and gas production company, said in the past few
years she has seen increased regulatory activity, and companies have to
make information available on a timely basis. “Now we have internal
auditing,” she said. “We have to provide legal entity documentation to
[the internal auditing department] on a regular basis. We have to share
and verify more information.”
Tracking Information
Because of an
increasingly stringent legal and regulatory environment, the type of
legal entity information today’s companies are tracking includes (but by
no means is limited to):
-
legal names;
-
office addresses
and contact
-
information;
-
when the legal
entity was formed;
-
when it was sold,
merged or
-
dissolved (if
applicable);
-
entity directors
and officers names and dates of service;
-
whether the entity
operates in the United States;
-
its country of
formation;
-
entity type;
-
company securities
information;
-
subsidiary and
parent company information (when applicable);
-
office names and
addresses;
-
registered agents
and related information;
-
critical entity
dates (annual meetings, board meetings, etc.); and
-
critical entity
records (articles of incorporation, bylaws, etc.)
Tracking this amount of
information can be daunting, especially for a large company, according
to Glen England, corporate records administrator for the New York-based
American International Group Inc., a multinational insurance and
financial services company with offices in more than 130 countries. “We
are tracking more than 6,200 entities worldwide,” England said. “And
that is only because we are not caught up.”
England is not alone in
this monstrous task. Tisdale said she also tracks just about everything
having to do with legal entities, and the company has about 175
subsidiaries. “I track all historical information, charter
documentation, securities ownership, officers and directors, powers of
attorney and just about anything else associated with the legal entity,”
she said.
Turning to Technology
for Solutions
In the past, managing a
legal entity’s documents and related information was a paper-intensive
process. Today, the complexity of managing voluminous amounts of legal
entity information, and the speed with which it must be made available
to others within and outside a corporation, means more and more
companies have no alternative but to leverage some of the latest
technological solutions.
“Some kind of entity
management software (vendor-based or homegrown Microsoft Word or Excel)
is probably being used today by the majority of the Fortune 2,000
companies,” said Mark Selinger, managing director of Computershare’s
World Records, based in Shelton, Conn.
One of the new
requirements of SOX legislation involves chief executive officer and
chief financial officer certification of a corporation’s financial
statements, so the information surrounding legal entities and what they
report is much more important today than ever before. Using entity
management software allows CEOs to track their corporation and
subsidiary business, particularly large multinational companies.
Similarly, because of
increased regulatory requirements, more company departments need access
to legal entity information. For instance, in the wake of SOX, many
companies have either added an auditing or regulatory function or have
augmented their existing functions. These departments need access to
important entity dates, formation information and documents.
Additionally, treasury departments often use entity management
applications to track important bank and investment dates, contact
information, loan agreements and other documents.
Company tax departments
also are eager to tap into jurisdictional information to determine where
an entity is incorporated and licensed to do business, and the critical
dates regarding tax filings for each of those jurisdictions. Tax
departments also use entity management applications to track important
tax identification numbers and related information.
Because of this
increased need for access, paralegals working in legal entity management
deal with many different professionals and are legal liaisons to just
about everyone in the company at one time or another. Selinger said the
office of the corporate secretary is the central location for keeping
legal entity data. “This department is constantly bombarded by other
departments, such as tax, finance, audit, intellectual property and
others asking for that data,” he said.
Management Tools in
Action
Today, the world’s
companies have many legal entity management applications from which to
choose (see “Legal Entity Management Technology” on Page 66 and 67). The
breadth, depth, capabilities and cost of these applications vary.
However, at a basic level, these applications all are designed to assist
a company’s law department with the task of managing legal entity
information.
Many legal entity
management applications available are Web-based. The importance of
having these applications accessible over the Web using a standard
Internet browser illustrates one additional reason companies have turned
to legal entity management solutions — distributed access and
distributed data input.
“One of the reasons we
needed a Web-based solution is because we have offices all over the
country,” said Ann Spitler, manager of corporate information for General
Growth Properties Inc., a Chicago-based shopping mall development and
management company. “People at the property level [where the shopping
malls are being managed] need regular access to the legal entity
information we maintain.” Spitler also said her department is looking to
phase in access to legal entity information via its Web-based solution,
Datacare’s Global Corporate Manager, to several other parts of the
company, including the tax, treasury and contracts departments.
According to England, a
Web-based solution works well for him because the questions he is asked
from tax, audit, accounting, regulatory, treasury and other company
departments on a recurring basis are much more complex than those he was
asked just a few years ago. With online availability, England now has
standard reports at the ready for common requests for information, such
as when a particular company was formed, when a company became part of
AIG and legal entity history. Instead of copying and snail mailing or
e-mailing these reports, the data is online and requesters can generate
the reports themselves.
Cheryl Gardner, a
senior paralegal with the New York-based Brown Raysman Millstein Felder
& Steiner, uses NRAI’s Corporate Compliance Manager to maintain a
database of all of the legal entities formed by the firm’s clients. “I
use the application to look up agent information, when the entity was
formed and other basic entity information the firm’s clients
periodically want to know,” she said. “Using NRAI’s application, the
information is literally at my fingertips.”
Using state-of-the-art
technology is key to successfully tackling legal entity management,
England said. He was one of the early adopters of the technology and
began using Bridgeway’s Secretariat in 1993. “I have seen [Secretariat]
grow and evolve, and it’s so much more sophisticated than it was,” he
said. “Almost every part of it is customizable.”
Jobs and the Future
While legal entity
management is not new, the regulatory and legal environment, along with
new technology and Web-based solutions, has increased its visibility.
These factors have opened the door for new career opportunities for
corporate legal assistants who want to work in the office of the
corporate secretary.
Spitler said legal
entity management is a new and evolving career for paralegals. “At
General Growth Properties, it evolved out of an effort to bring all the
corporate work in-house,” she said. “I was hired on as a senior
corporate paralegal and it grew into this position.”
Gardner said 24 years
ago she became a paralegal-litigation liaison between clients and
out-of-state counsel in her brother-in-law’s firm. She had a master’s
degree in biochemistry, but no formal paralegal or corporate training.
However, the firm quickly recognized Gardner’s organizational skills.
Slowly she learned the legal aspects of her job, from litigation to
bankruptcy, and finally corporate. The past nine years, she has focused
on corporate transactions, corporate housekeeping and the Uniform
Commercial Code.
According to Tisdale, a
position in corporate governance is not always attained through
traditional channels. “It’s a funny field to get into,” she said. “I
don’t know if there is one single way to prepare for this type of
position. It takes corporate legal experience. You need to know about
title work. You need to know about legal transactions and contracts.
It’s very diverse, down to transcribing the transactions of the company
for the IRS and SEC. Everyone wants to know what you are doing when you
are a public company.”
While the career paths
to finding a job in legal entity management vary with each company, all
companies have a growing need to better manage legal entity information
in a more timely and efficient manner. Selinger said if companies are
not yet using legal entity management software, they are missing out on
an opportunity to become more efficient in terms of supporting their
internal and external business partners and proactively maintaining
subsidiary compliance.
As regulatory
requirements continue to grow, so will career opportunities in the field
of legal entity management. Paralegals who are well versed in corporate
law and willing to learn new technologies will have a leg up in this
burgeoning job market.
Legal Entity Management Technology
Just a few years ago
there were only a couple of legal entity management applications. Today,
there are more than a handful. This listing features some of the most
well-known Web-based products.
*Information in the chart was provided by the vendors. Please contact
individual vendors for more information.
Bridgeway
Secretariat
www.bridge-way.com
(713) 599-8300
Client base:
500 companies. About two-thirds of the clients are Fortune 1,000
companies.
Platform:
Starting with Version 8, Secretariat is a Web-based application. The
server is Java. Clients use an Internet browser. The System
Administration component is a .NET-based Windows application that
communicates with the Java-based server. Secretariat supports SQL and
Oracle databases on the back end.
Customization of
fields: Standard fields can be relabeled based on either
“Entity” or on the user’s “View” profile. An unlimited number of
user-defined fields can be added to the standard data entry pages. Users
can build new custom tabs.
Security and
administrator management: Administrators control password
length, duration, character requirements and automatic lock-out
settings. It integrates with Lightweight Directory Access Protocol,
Window’s Active Directory and Netegrity SiteMinder for alternative
authentication methods. It has multilevel security and field-level
access.
Managing
historical information: Directors and officers, registrations
and securities information contain start and end date fields to retain
historical data. Clients can view data using date range filters on the
data entry pages or run ad hoc searches for a specific time period.
Generating
reports: Secretariat contains numerous standard reports using
Crystal Reports powered by BusinessObjects Enterprise as the reporting
engine. Also, the Analysis Center provides access to reports with
tables, charts and graphs. Use the “Search” tool to create simple or
complex queries and export the results to user-defined ad hoc reports,
Microsoft Excel or a predefined reports template.
Organizational
charts and graphical reporting: CorpCharts is used to create
graphical organizational charts based on the ownership hierarchy of any
entity. CorpCharts also can be modified to include various fields of
data. CorpCharts uses Microsoft Visio to generate the charts.
Document
assembly: Secretariat integrates with LexisNexis’ HotDocs 2005
Server application to generate documents. Many standard templates are
included, and clients can create and upload custom templates.
Price:
$10,000 and up, depending on client requirements. Bridgeway renders
service on a fixed-fee basis.
Computershare’s World Records
www.worldrecordsonline.com
(203) 944-7300
Client base:
More than 150 clients.
Platform:
It’s available in a hosted platform for Web access or it can be
installed on a client’s local server/intranet.
Customization of
fields: Clients can add or hide fields, customize field names
and add and report on an unlimited number of fields of any type and
length.
Security and
administrator management: The hosted platform is offered through
a SAS-70 Type II-certified data center with round-the-clock
firewall-protected access to the client’s data, security, disaster
recovery and power interruption handling. Administrators can provide
groups of users with various predefined access levels to the application
(read only, administrator, etc.) and secure specific modules, sections
and fields for authorized users only.
Managing
historical information: A built-in “Time Machine” system allows
users to see historical data on entities as they existed at a specific
point in time and within a range of dates. That includes organizational
charts, director and officer information and more.
Generating
reports: There are more than a dozen standard reporting modules
and an advanced reporting module that let users filter data on multiple
criteria (such as officer, address, signing authority, etc.) to produce
a range of ad hoc reports.
Organizational
charts and graphical reporting: HTML organizational charts can
be created dynamically from the organizational structure and ownership
data in the system. The data can be extracted through Visio to produce
graphic charts with shapes and colors.
Document
assembly: Templates for consents, by-laws and re-elections can
be created and stored within the system. The application is linked for
direct filing of Companies House forms in the United Kingdom. Registered
agent forms filed with CTAdvantage are prepopulated.
Price:
World Records enterprise pricing ranges from $25,000 to $150,000,
depending on the number of users, entities, etc.
CT’s hCue
www.ctlegalsolutions.com
(212) 894-8940
Client base:
Mostly Fortune 1,000 companies, large law firms and private
companies.
Platform:
Web-based.
Customization of
fields: Users can add custom fields and specify the field name,
length and type. CT’s hCue automatically performs run-time data
validation of the custom fields based on the specified field type. Users
can run a report on custom fields.
Security and
administrator management: Role-based security allows end users
to restrict access to various parts of the application screens and read
or write access to key transactional data. Roles and permissions are
self-managed by the end-user’s administrator.
Managing
historical information: It maintains historical information for
key data points such as an entity’s assumed names and the termination
date, and information for officers and directors.
Generating
reports: Custom reports include corporate summary, management
structure and insider reports. Users can specify the selection or
filtering criteria in generating ad hoc custom reports. Reports are
available in Excel and Adobe Acrobat PDF format.
Organizational
charts and graphical reporting: Users can generate graphical or
outlined organizational charts in either owned-by or owner-hierarchical
views. Information is displayed in each level of the chart.
Document
assembly: The “Document Management Templates” feature allows
users to auto-generate documents such as consents and resignations. All
documents automatically are populated with the entity information. HCue
also is integrated with CTAdvantage.com.
Price:
It’s based on a tiered, flexible pricing model. Training and
implementation services also are available.
Datacare Global
Corporate Manager
www.data-care.com
(866) 443-8426
Client base:
Approximately 700 customers worldwide, with more than 100 customers
in North America (ranging from Fortune 1,000 domestic companies to
Fortune 10 global companies).
Platform:
It’s a Web-based, n-tier architecture based on Microsoft technology
(SQL Server; IIS; Windows Server; ASP/.NET).
Customization of
fields: There is practically unlimited customization and
configuration, including adding, removing, renaming and moving fields.
Security and
administrator management: It has a multilayer security model
that allows for different types of users (administrator, edit, browse)
with varying degrees of access (screen, module, field, entity record,
person record and document).
Managing
historical information: All information is date stamped,
allowing for date-based searching and reporting. Users can see a
snapshot of a company based on a specific point in time or run a report
showing all changes over a period of time.
Generating
reports: More than 300 canned reports are provided and can be
modified to suit clients’ specific requirements. An ad hoc
query/report builder allows users to build reports and can include
information from anywhere in the system.
Organizational
charts and graphical reporting: The creation of standard
organizational charts is provided via an integrated graphical
third-party product. Highly complex charts can be created in Visio using
a database integration tool.
Document
assembly: Document assembly is provided in conjunction with
LexisNexis HotDocs so customers can create standard forms, consents,
resolutions, etc. GCM is integrated with the online version of HotDocs.
Price:
Pricing starts at $1,250 per month for the ASP service. The software
product starts at $25,000 and has an annual support and maintenance fee
based on a percentage of the licensing fee.
NRAI Corporate Compliance
Manager
www.nrai.com
(800) 550-6724
Client base:
N/A
Platform:
Web-based.
Customization of
fields: Clients can add unlimited fields. The fields can be
numeric, text, currency and date specific (date fields can be added to
the CCM calendar).
Security and
administrator management: The CCM security model allows clients
to administer their own users. The administrator can give users
multilevel access, and specify the type of access they have and where
they have access.
Managing
historical information: The user has the ability to run reports
on any of the sections of CCM by specific dates and ranges. Users also
can create and save filters for reporting.
Generating
reports: CCM has standard reports, and users can create their
own reports that allow for sorting and filtering.
Organizational
charts and graphical reporting: The system supports the creation
of organizational charts or other graphical reporting.
Document
assembly: The application uses document assembly techniques to
generate various documents and reports.
Price:
Pricing is determined first by whether the client is an NRAI client and
then by company entity size.
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