Software Simplifies Corporate Governance

Corporate governance is becoming more and more complex, requiring corporate secretaries to maintain accurate legal records for a rapidly expanding number of business entities under the parent company.

And publicly traded corporations are subject to new and more complex government requirements, including the Sarbanes-Oxley Act. Fortunately, automated governance systems can make the job of the corporate secretary easier and more efficient.

New England companies of all sizes can keep corporate records, manage governance data and complete required tasks for subsidiaries and other entities located throughout the world.

Automated governance systems make the duties of the corporate secretary faster and easier while improving execution in three ways.

First, an automated system creates a central database for storage and access to records for each entity. Second, a good automated system has built in reminders to complete required tasks within their deadlines. Third, an effective automated governance system shares accurate, timely legal entity information with legal, tax and other departments, as needed.

Before corporate governance software programs existed, many corporate secretaries manually distributed their corporate entity information in binders every three to six months to an allotted list of individuals.

These notebooks contained information on where each business entity was incorporated, where it was doing business, a list of the current directors and officers, stock filings and other pertinent information. Since business entities change rapidly, these notebooks were out of date almost immediately, and changes were recorded with a red pen until the word-processed records could be corrected and redistributed.

Centralizing Control

The most important benefit from automating corporate governance is the creation of a central database administered from the office of the corporate secretary. Centralization ensures that information updates are timely and consistent, data access is controlled, security is maintained and that authorized people can retrieve information electronically within minutes. Many companies have a designated database administrator who handles updates and performs information retrieval.

With a database administrator entering changes in entity information as they occur, the central governance database is maintained in “real-time,” meaning that the database is seldom out of date. Information is fresh and can be located by a simple key term search using any date or date range as a filter.

In some companies, the database administrator retrieves information in response to requests within the company. In a growing number of organizations, authorized users are accessing entity information directly and securely in real-time on their own. This eliminates the need for the manual distribution of corporate data sheet books, significantly reduces the amount of time the corporate secretary spends answering questions, and ensures that the information is current and accurate.

A good governance software system also reminds the corporate secretary’s staff of upcoming due dates and records completion dates leaving a history of events. The software system has the ability to set calendar reminders for each entity in every jurisdiction in which it is doing business.

Companies with international entities have local counsel in each country responsible for staying on top of resident government requirements. An entity management system with a good calendaring system recording tasks by entity makes it possible to stay in compliance locally and around the world. Prior to automation, it could take months for a corporate secretary’s office to answer a question about all of the foreign nations in which the company was doing business.

The very best systems will also help automate some of the routine workflow processes that are the responsibility of the corporate secretary. Wizards perform tasks that update the entity database and create the documents and forms for repetitive duties such as annual meetings, global director and officer retirements and appointments, and government forms for incorporation and qualification filings.

Most governance software programs now facilitate online filing, which is required by most states and the federal government. Registered agents charge fees for making these corporate filings. Now a company can complete the filing with a registered agent or directly online with most states at no additional cost.

Most of the time, the office of the corporate secretary retrieves information to answer a question. Often the questions come from attorneys in the legal department for mergers, acquisitions or litigation.

A corporate governance database can make the necessary data readily accessible to lawyers and other authorized personnel. The central database administrator can delegate authority and limit access to a specific entity or group of entities.

A corporation must ensure that its governance software program gives the corporate secretary central control over who can access the database. For example, lawyers for a corporation in a specific jurisdiction may have “read-write” access, meaning that they can make changes to the database. Others in the company may have “read-only” access and be unable to enter data or change records.

Tyco Example

Tyco International Ltd., based in Portsmouth, N.H., is a company that quickly realized the benefits of its automated corporate governance program, which was installed in 2000. Pat Travis, entity database administrator, says, “I can’t imagine being without our entity database.”

With over 2,300 subsidiaries throughout the world, Tyco attorneys and paralegals had their hands full manually tracking information. If Tyco needed to identify directors, officers or other information about an entity, they had to search through company records and minute books, which took hours if not days.

Tyco had installed a corporate governance software system, which allows 30 read-write users who update the status of their entities in real-time and identify who is responsible for records maintenance of each entity.

Sixty additional Tyco users in the tax, treasury and law departments have read-only access. The system tracks the status of entities, their jurisdictions, contact information, directors and officers, ownership, share certificates and the locations of those certificates. Pat Travis notes: “In the corporate governance world of today, where best practice and communication are mandated for our companies and by our shareholders, an entity database is a vital and valued tool.”

For small companies or large companies like Tyco, corporate governance software systems are now available on an enterprise-wide hosted environment. Hosting service providers usually charge a monthly fee with the hardware and software supplied at no additional cost.

Data is hosted from a powerful central server at the vendor’s offices, which stores the company’s governance database securely on its own Virtual Private Network (VPN). A hosted system has a number of advantages in that it offers a quicker and easier start-up, involves no investment in hardware or software, and can be expensed rather than capitalized.

Hosting also provides the company with software upgrades at no additional cost or company effort. At a time when both states and the federal government are rapidly changing compliance requirements, this is also an important feature.

Automated governance software systems are tailored to fit the budgets and needs of virtually every corporation, ranging from simple stand-alone desktop systems to enterprise-wide hosted Internet-based solutions. While the pressures of company growth and government requirements are making compliance for the corporate secretary more complex, automated corporate software systems make the assignment easier.

What were once mind-boggling tasks can now be simple everyday processes for the corporate secretary’s staff. In the long run, the system will pay for itself by allowing the company to handle a greater governance load without increasing, or perhaps actually reducing, staff.

Pat O’Donnell is the founder and president of Bridgeway Software, in Houston, the leading provider of automated corporate legal solutions (www.bridge-way.com). He can be reached at [email protected] or 713/599-8300.