Companies are perpetually looking for ways to reduce operating costs, improve their tax position and reduce legal risks. These goals may be achieved by simplifying the legal structure of a group of companies.
Often complicated legal structures are side effects of M&A projects, internal reorganizations or historic use of subsidiaries for special purposes. In some cases companies have ended up with complicated structures consisting of dozens or even hundreds of legal entities. Maintaining a complex group legal structure with a significant number of redundant entities can make the company susceptible to significant legal risks which can harm the company and its shareholders. Such structures also tend to accumulate costs across the group of companies. Below, I have listed reasons why companies should simplify their legal entity structure.