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Get in Shape for 2018

Group Reorganisations

LCN Updates

Intercompany Agreements

31 January 2018

This article appears in the January edition of our International Corporate Structures Newsletter.

When I started out as a corporate lawyer in the early 1990s, it was all about one-off transactions and projects: helping clients to buy companies, set up joint ventures, appoint distributors, appoint agents. Most of those clients were German, Swiss or Austrian; some were well-known companies, but more often they were established ‘Mittelstand’ companies which were expanding internationally. After I joined KPMG’s law firm in 2001, my focus shifted to internal legal structures within large corporate groups, working alongside international tax teams. It was a more holistic view, but also more tightly defined.

Now, with my colleagues at LCN Legal, the essence of our work is as much about international intercompany governance (designing, implementing and maintaining structures), as it is about corporate law. And of course clear intercompany agreements are a key tool for intercompany governance, because without those agreements, parent and subsidiary boards have no firm reference point for considering and approving intercompany relationships.

We’ve chosen the theme of 1980s fitness icons to help celebrate the New Year … and to reflect the annual surge in gym membership which takes place every January. The ‘body beautiful’ is also an analogy for the health of a ‘body corporate’. The legal, governance and accounting structure of a group may not be its beating heart or its muscles – but it can be likened to its circulation system, bones and ligaments: the conduit for interacting with the outside world, and the means of transmitting life blood around the body.

We come across a lot of ‘corporate bodies’ here at LCN – the good, the bad and the ugly (or maybe more fittingly: the toned, the flabby and the dysfunctional). Many of our larger clients have well-established teams and documented processes in place to align intercompany legal governance with commercial and tax objectives, and our role is to give guidance as to how those systems and documents may need to be re-aligned or improved. Other corporates may be at a less advanced state of compliance, or may have more modest needs – in which case more root-and-branch approach will be required.

Fitness is not a destination, it’s a process. It’s dynamic, not static. You can’t expect consistent good results if you create appropriate habits in just one area – such as exercise – without also creating appropriate habits in related areas, such as diet, sleep and mental wellbeing. The same applies to corporate structures. For a real-life example of the link between governance and tax risks, see the article kindly contributed by Paul Harrison.

We’re here to help with the process of getting your corporate group fit and healthy, so that it can face 2018 in the best possible shape – and to invite you to join us in celebrating the exuberance of some of our favourite fitness icons from the 1980s. Enjoy!

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Article by
Paul Sutton
LCN Legal Co-Founder

Free Guide: Effective Intercompany Agreements for TP Compliance