Corporate Governance Fundamentals 18, 2015 Corporate Governance Fundamentals Karen Santangelo...
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June 18, 2015 Corporate Governance Fundamentals Karen Santangelo Jennifer K. Mailander Paralegal Associate General Counsel Allegis Group, Inc. Corporation Service Company
Transcript of Corporate Governance Fundamentals 18, 2015 Corporate Governance Fundamentals Karen Santangelo...
June 18, 2015
Corporate Governance
Fundamentals Karen Santangelo Jennifer K. Mailander
Paralegal Associate General Counsel
Allegis Group, Inc. Corporation Service Company
Page 1
What is Corporate Governance?
Corporate Formalities
Key Players in Corporate Governance
Technology
In-House Paralegal – Best Governance Practices
Top 10 Tips for Corporate Governance
Q&A
Agenda
Page 2
The rules, processes, and practices by which a company is directed and controlled.
Critical for ensuring compliance by the company
Governance involves the balancing of the interests of many stakeholders.
Board, shareholders, management, customers, employees, suppliers, financiers, government, community
Maintaining good governance and corporate separateness mitigates risks & saves money.
Ensures accuracy of reporting and recordkeeping.
Governance reflects a company’s culture.
What is Corporate Governance?
Page 3
Scandal and financial disaster
WorldCom, Enron
Raised questions about board of director and auditor effectiveness
Increased federal government involvement in governance practices of public companies
Increased requirements
Sarbanes-Oxley
FATCA – Foreign Account Tax Compliance Act
FCPA – Foreign Corrupt Practices Act
Federal Sentencing Guidelines
Financial Services Act
Bribery Act
Increased Focus on Governance
Page 4
Under Delaware law, the courts generally respect the
separate legal existence of different legal entities.
In appropriate circumstances, a court may “pierce the
corporate veil,” i.e., disregard the legal separateness of a
corporation or limited liability company and hold a parent
corporation liable for the debts or actions of one of its
subsidiaries.
Piercing the Corporate Veil
Page 5
Delaware courts traditionally have been reluctant to
disregard the corporate form absent a showing of
extraordinary circumstances.
See Harco Nat’l Ins. Co. v. Green Farms, Inc., 1989 WL
110537, at *1038 (Del. Ch. Sept. 19, 1989) (noting that
“persuading a Delaware Court to disregard the corporate
entity is a difficult task”).
No bright line rules
Because veil piercing is an equitable doctrine, there are no
bright line rules that plainly establish when it will apply.
Piercing the Corporate Veil (cont.)
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The corporation was adequately capitalized for the corporate undertaking
The corporation was solvent; no mingling of funds
Dividends were paid
Corporate records were kept
Filings and other corporate formalities were observed
Directors and officers functioned properly
The dominant stockholder siphoned corporate funds
The corporation simply functioned as a façade for the dominant stockholder
There were overlapping directors and officers
The subsidiary corporation and the parent entity shared the same address and or resources
Corporate Formalities
Page 7
Corporate filings
Initial filings with federal/state agencies
Annual report filings (State requirement)
Tax filings (U.S./international)
Maintaining documents
Minute books
Annual resolutions, e.g., electing officers/directors
Other agreements
• Capital contributions
• Intercompany agreements
Corporate Formalities – Role of Paralegal
Page 8
Lawyers/Paralegals/Legal Assistants
Corporate Secretary
Business Operations
Corporate Services
Tax/financial reporting
HR
Treasury
Corporate Officers
Board of Directors
Shareholders
Key Players in Corporate Governance
Page 9
Single repository for key company & governance information
Security & privacy
Disaster recovery for your data & documents
Controlled accessibility
Audit trail
Communication & collaboration
Document management
Organizational charts
Compliance Calendar
Alerts & notifications
Reporting
Technology
Page 10
Partner and “guard dog”
Partner with business on company transactions
Prepare and file governance documents for subsidiaries,
affiliates, and joint ventures
Assist foreign subsidiaries with the preparation of
governance documents
Maintain a central repository of governance documents
Promote consistency and best practices
Educate, provide advice, and counsel on all aspects of
subsidiary governance (including affiliates and JVs)
In-House Paralegal – Best Governance Practices
Page 11
Top 10 Tips for
Corporate Governance
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Can be difficult in the current economic environment
Utilize other departments if possible
Document costs and expenditures, and look at ways
to reduce them without adversely affecting your
effectiveness
Be honest about what you can deliver and the risks
10. Ensure You Have Necessary Resources
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Use and maintain a database that is appropriate for
your company size and the number of subsidiaries
For some, an Excel spreadsheet is adequate while
others need a more sophisticated package
Utilize your registered agent’s website for ordering
good standing certificates, forms, etc.
Utilize other online resources (e.g., Secretary of
State websites, Society of Corporate Secretaries &
Governance Professionals websites)
9. Take Advantage of Technology
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It is critical to keep your subsidiary information current
Carefully consider what information you want to track in your database and the level of access for persons outside the corporate secretary’s office
Authorize only a few people to update your database and don’t update without first obtaining the signed written consents or minutes
Develop a system to annually audit and update your information
8. Keep Your Information Current
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Maintain a database of service providers – this is
particularly important for non-U.S. entities where you will
need assistance from service providers for most
in-country activities
Be honest with yourself about what you can do in-house
and what needs to be handled by outside counsel (e.g.,
tax filings, etc.).
Look for cost savings through consolidation of service
providers
7. Know and Review Your Service Providers
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Provide subsidiary directors and officers with
training regarding their duties and responsibilities
Survey your subsidiary directors and officers on an
annual basis to ask:
Are your entities correct?
Are your appointments correct?
Do you accept and understand your corporate
governance responsibilities for your roles?
6. Facilitating the Sharing of Governance Data
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Important to maintain corporate separateness – keep
in mind when appointing overlapping subsidiary
directors and officers
Remember to do annual filings
Remember to maintain minute books
Document all intercompany transactions (e.g.,
intercompany loans, intercompany sales or service
agreements)
5. Protect the Corporate Veil!
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Don’t assume that every state is the same as
Delaware – when in doubt, read the statute and read
the form instructions
Non-U.S. subsidiaries are a trap for the unwary. You
need local advice and assistance in complying with
local law
4. Be Aware of Differences Between Jurisdictions
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Work with your attorneys to review dormant entities
to determine if they can be eliminated (either through
dissolution or liquidation)
Keep up to date on changes in law and forms that
may affect your filing requirements
Work with your attorneys to ensure that
management understands the costs associated with
adding new or dissolving entities with your
corporate structure
3. Periodically Review Your Corporate Structure
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Develop and know your standard policies, practices,
and procedures for subsidiary governance
Develop process to make sure that all constituencies
(Legal, Tax, Treasury, Accounting, Operations) are
aware of and have signed off on actions to be taken
Do not backdate documents (e.g., minutes, written
consents, powers of attorneys)
Calendar due dates for annual meetings, annual
report filings, etc.
2. Create Strong Internal Processes
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Use your contacts in other parts of the organization
(e.g., Human Resources) to help you keep up to date
on developments affecting your subsidiaries
Develop a core team of company contacts to assist
on subsidiary management issues
Increase awareness through a corporate secretary’s
page on your intranet site, with links to important
information
Talk to your peers outside the company regarding
best practices and to stay abreast of new
developments
1. Network Within and Outside Your Organization
Page 22
Questions?
