Legal entity rationalization is the process of reviewing an organization’s legal structure to determine if all existing entities are necessary. There are real benefits to regularly reviewing an organization’s structure to uncover possible opportunities to gain efficiencies, some of which might be brought on by the dissolution of certain entities, commonly called “winding down.”
There are many reasons an organization may want to wind down an entity abroad. For example, its corporate strategy may change, leaving it with superfluous offices in another country. Or its operations in a country may have been acquired by another organization. Or it may find a drop in demand for its products or services in a particular market, ultimately leaving it with no employees in that country and no plans to hire more.
As a structure gets more complex, it is imperative to examine the function and contributing factors of each entity within the organization. When reviewing your structure, you’ll want to be guided by the idea that each legal entity should be performing its role supporting the success and growth of the business, and not becoming a burden or adding no value. You’ll also want to ask specific, practical questions when deciding whether to wind down a particular legal entity.
Read the full blog article here for a list of questions to ask before dissolving a legal entity.
Wanying Zheng is an Advisory Manager with Radius where she specializes in personal tax and global mobility planning. She is also an authority on entity set up, structuring, and wind-downs. Based in Singapore, Zheng is fluent in Cantonese, Mandarin, Japanese, and English. Prior to joining Radius in 2014, she held positions at Deloitte and EY.