Our client for this ICA project was a multinational group in the consumer products sector. Although the business was relatively young, it was already highly successful and had expanded rapidly with a presence in many countries across Australasia, Europe and the US.
As often happens with fast-growing companies, the group’s focus had been on managing that growth and keeping up with demand from customers and investors. This had taken attention away from equally important but less high-profile issues like developing internal processes. The business leaders realised that although this was not yet causing an immediate problem, there were several matters that need to be addressed including the adoption of a group transfer pricing policy and the legal implementation of the same.
We began by instigating a detailed review of the business, holding discussions with key stakeholders and reviewing documentation and process, until we had an in depth understanding of the group’s history and objectives, its intra-group transactions and how all this neede to be reflected in its intercompany agreements. An important part of managing this process and extracting the necessary information was to guide the client ensuring we asked the right questions in order to uncover issues that perhaps the client wasn’t aware of or did not determine as relevant.
As expected, we found a range of things that needed to be addressed, mostly stemming from the legacy of the group’s rapid expansion, such as inaccurate historic intercompany agreements that did not reflect the reality of the intra-group arrangements.
Once everything had been finessed and a bespoke and substantively accurate suite of documents provided to ensure the transfer pricing policy of the group was legally implemented, the main process was complete. The group’s directors could now focus on growth and their strategic goals, safe in the knowledge that their transfer pricing policies had genuine legal substance and would withstand scrutiny in a tax audit. As always, it’s important to continue to monitor the ICAs at regular intervals – particularly with a group that is growing as fast as this one.
There are other long-term benefits of carrying out the process too. We can share our understanding of the business: the provision of a clear legal picture is very useful to an expanding and acquisitive group . Having a fully functional suite of intercompany agreements also simplifies the ongoing process of maintaining compliant documentation within developing group of companies.