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A Paralegal's Guide to Managing Legal Entities
How to track corporate information with the latest Web-based applications.
(Originally appeared in print as "Managing Legal Entities")
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 paralegal 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.”
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):
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.
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.
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.
Client base: Mostly Fortune 1,000 companies, large law firms and private companies.
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.
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.
Client base: N/A
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.
Cary Griffith is an author, consultant and president of the Electronic Book Company. In addition to writing a variety of legal technology columns, he has been a frequent contributor to several publications on legal and information technology issues, outdoor recreation, hiking, wildlife and related topics. He is also the author of "Lost in the Wild," published by Borealis Books. You can reach him at firstname.lastname@example.org.
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