Outsourcing entity management is on the rise, research shows

Challenges recruiting staff and the cost of compliance are driving a rise in outsourcing

Senior executives at major companies are forecasting a rise in outsourcing entity management as they grapple with recruitment issues and the rising cost of regulation, new research* from Ocorian, the specialist global provider of services to corporates, shows.

When sourcing a corporate services provider, more than two out of five (43%) rely on their law firm or accountants to recommend a specialist third party but around one in five (22%) say they ‘Google it’ while 25% rely on word-of-mouth recommendations and 10% source suppliers via trade fairs.

The study with over 100 company secretaries, general counsels and senior tax and corporate lawyers working for listed and private companies with combined revenues of more than £45.8 billion shows they expect major increases in the level of outsourcing across a wide range of services.

More than half (51%) expect significant increases in outsourcing of company secretarial services over the next three years while 49% forecast sizeable increases in outsourcing accounting, tax and reporting services, the research from Ocorian, which supports 15,000-plus corporate entities, found.

Increasing use of outsourcing for incorporation and establishment services

Around 36% believe voluntary liquidation services will see dramatic growth while 28% predict strong expansion in directors and substance services. Just 18% believe they will increase their use of outsourcing for incorporation and establishment services.

Jason Gerlis, Global Head of Corporate Services at Ocorian, said: “When asked about the services that they intend to outsource, incorporation and establishment are less of a priority then company secretary and substance services. This is reflective of increased global regulatory pressure and the need for entities to comply in the tax domicile of choice.

“Whilst 51% expect significant increases in outsourcing of company secretarial services and 49% forecast sizeable increases in outsourcing accounting, tax and reporting services points to the difficulty of recruiting the right people with the right expertise. This is where service providers such as Ocorian can play an important role."

Problems recruiting inhouse staff and the cost of compliance are the most important reasons for increased outsourcing. More than half (51%) rated the issues as among their top two reasons for outsourcing. Around a third (33%) say the growing number of jurisdictions they operate in is a major influence.

The senior executives at the firms based mainly in the UK but also working in Switzerland, Sweden, the Netherlands, Germany, France, Italy and Denmark already use outsourced services and work for FTSE 250 and FTSE 350 firms as well as private companies with revenues of between £10 million and £1 billion.

Ocorian’s research found senior executives most value support and response in real time when selecting an outsourcing provider. Around 61% selected that as the most important attribute ahead of 56% who valued having a local presence in jurisdictions and 47% who look for active corporate governance guidance.

Jason Gerlis, Global Head of Corporate Services at Ocorian, said: “The only constant in our world is change; companies rationalise their entity structure more often to contend with the many different tax regimes worldwide. Ten years ago, a corporate structure may have lasted several years, but now it probably serves for two or three at the most. With these changes come greater substance obligations such as directors based in the relevant jurisdictions who take decisions in those places, as well as infrastructure, equipment and other employees. Typically, we see that our corporate clients often prefer to outsource this work and they may not need a whole FTE, so by using a specialist third party provider such as Ocorian, our clients can access a talented pool of staff and use their skills to the extent required.

“Senior executives are expecting dramatic increases in outsourcing over the next three years with company secretarial services a major area for expansion. They need to find trusted partners who have strong relationships with local regulators as our research suggests this is the way to minimise the risk of regulatory fines, avoid investor issues and meet all their obligations.”

Reduce the burden of corporate administration by outsourcing entity management

Ocorian provides entity management, fiduciary and corporate administration to thousands of businesses around the world offering a broad range of corporate services to establish, administer and give substance to a wide range of legal structures across sectors including telecommunications, energy, manufacturing, aviation and shipping.

Its company incorporation specialists are commonly involved in the set up and ongoing administration of corporate structures and SPVs for M&A, private equity investment, asset housing, restructures, real estate, international expansion, funds and debt listing purposes.  

Ocorian also provides a range of ancillary services including corporate administration, statutory compliance, board meeting support and local resident director services.  Its global network means local experts have in-depth knowledge of the regulatory requirements in different jurisdictions ensuring the establishment of entities complies with all local laws.

*Ocorian commissioned independent research company PureProfile to interview 100 company secretaries, general counsels and senior tax and corporate lawyers working for FTSE 250 or FTSE 350 companies and private companies with annual revenues of between £10 million and £1 billion during June 2023. Senior executives interviewed work in the UK, Switzerland, Sweden, the Netherlands, Germany, France, Italy and Denmark in the energy, mining, retail, real estate, transport and manufacturing sectors and currently use third-party corporate services provider for some or all of their entity management obligations.