LAW
In many countries, compliance policies are an“ imported good”, i. e. they are localized texts built on original texts drafted for different countries. In the“ receiving” countries, the awareness of the consequences of breaches will often be lower when compared to the more sophisticated markets of the“ headquarters”
26 top-levels of the group, to their respective leaders. Hence, a sizeable portion of the employees in the entities organized in the various countries would be connected to their local managements only by a so-called“ dotted reporting line”, resulting in a looser oversight by the local leadership.
Increasing efficiency requirements pressure these groups to organize themselves in a manner avoiding redundancies and consequently promoting a cross-entity and cross-border sharing of human resources. One result of that trend can be the formation and maintenance of specialized“ service entities” that do not act as profit-centers and whose resources are shared in the group to perform certain functions or whose purpose is reduced to own certain assets only. More generally, employees of one entity can perform the same function for( or serve) several entities within the same group, as far as this is legally and practically possible due to the variance of local rules. In more extreme cases, a specific employee would be connected to an entity in Country X by a direct reporting line for some of the tasks, and by another direct line to an entity in Country Y in relation to the other tasks. A notable consequence of the mentioned sharing of human resources is that entities that operate a sizeable and sometimes sophisticated business may need only a small pool of employees and have a number of tasks be handled by the employees of the support entities within the group.
Can the laws cope with this level of“ organizational creativity”? By nature, every legal entity needs natural persons through which it can act. It must establish a system of delegation of duties and authorities to function, act and transact. Setting the legal frame for the acting individuals poses challenges in groups where organizational duties are allocated in the described complex cross-border manner.
Laws have an“ incomplete” view of the real functioning of groups. Jurisdictions that do not even recognize the concept of affiliation( including the Turkish Commercial Code of 1956) have big challenges to grasp the reality, in that they assume that all entities are acting autonomously.
Some other jurisdictions do regulate affiliation, but they do not properly acknowledge the bundling of several