{"id":260,"date":"2023-03-14T05:29:47","date_gmt":"2023-03-14T05:29:47","guid":{"rendered":"https:\/\/www.dealsplus.io\/blog\/?p=260"},"modified":"2023-06-12T08:13:59","modified_gmt":"2023-06-12T08:13:59","slug":"using-data-to-track-substance-in-holding-jurisdiction","status":"publish","type":"post","link":"https:\/\/www.dealsplus.io\/blog\/using-data-to-track-substance-in-holding-jurisdiction\/","title":{"rendered":"Using data to track substance in holding jurisdiction"},"content":{"rendered":"\t\t
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Private market funds commonly use holding jurisdictions to consolidate their investment holdings and keep things efficient from an operational and tax perspective. For example, Luxembourg is commonly used as a holding jurisdiction for investments in Europe.\u00a0<\/p>

Holding jurisdictions like Luxembourg have well-established legal and regulatory frameworks and a wide network of double tax treaties. However, the ability to avail of these double tax treaties rests on the substance that is maintained in the holding companies. Not having substance in your holding companies can result in adverse tax consequences.\u00a0<\/p>

Substance requirements need to be met continuously and cannot be an \u2018as at a time\u2019 check. Most large private equity managers have numerous entities in their holding jurisdictions like Luxembourg. It is currently a challenge to track and monitor substance in these holding companies continuously.\u00a0<\/p>

We believe that fund managers can use data in systems like DealsPlus to track and monitor substance continuously as listed below.\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Substance Criteria<\/th>Requirement<\/th>Substance monitoring with Dealsplus<\/th><\/tr><\/thead>
\u00a0<\/td>\u00a0<\/td>\u00a0<\/td><\/tr>
Board composition\u00a0<\/strong><\/td>
Is half or the majority of our board resident in the holding jurisdiction?

Is the resident board appropriately skilled and competent?

<\/td>		Flags companies where half or more of the board is not resident locally.\u00a0Captures the skills and experience of directors.\u00a0<\/td><\/tr>
Board procedures<\/strong><\/td>
How frequent are board meetings in your holding companies?

Are they physically attended?\u00a0

Are they well documented?

<\/td>		Sets board meeting calendars to ensure the frequency of board meetings, along with capturing data on attendance and documentation.<\/td><\/tr>
Personnel and office space<\/strong><\/td>
Do holding companies have their own office space and associated infrastructure?

How many local employees?

What is the annual local payroll and associated expenditure?

<\/td>		For each legal entity, capture and track personnel, payroll, and office space information and flag where there are risks.\u00a0<\/td><\/tr>
Company records<\/strong><\/td>
Do companies have local bank accounts and are they used for all transactions?

Are accounts prepared and signed locally?

Are tax returns prepared and signed locally?

<\/td>		Captures bank account details and their usage.\u00a0Capture and track all relevant filings – accounts, tax returns, VAT returns \u2013 including information on where \/ who prepared and signed them.\u00a0<\/td><\/tr>
Purpose<\/strong><\/td>
Do you maintain proof of business activity and risks? (e.g. in addition to decision-making, does the capital structure reflect risks borne)

Type and number of investments held?

<\/td>		Maintain relevant documentation in each entity\u2019s governance data room, get detailed capital structure data to analyse \u2018capital at risk\u2019 position, and investments held.\u00a0<\/td><\/tr>
Shareholder meetings<\/strong><\/td>
Are Luxembourg managers free to run the company on most matters other than \u2018outside the normal course\u2019 of business?

<\/td>		Track the frequency of shareholder meetings along with meeting documentation.\u00a0<\/td><\/tr><\/tbody><\/table>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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In addition to substance monitoring, DealsPlus\u2019 six powerful modules \u2013 Legal Entity Management, Cap Table Suite, Compliance Tracker, Structure Charts, Data Room, and Funding Memo – combine to help private equity managers seamlessly manage their investment structures and keep them \u2018transaction ready\u2019.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Private market funds commonly use holding jurisdictions to consolidate their investment holdings and keep things efficient from an operational and tax perspective. For example, Luxembourg is commonly used as a holding jurisdiction for investments in Europe.\u00a0 Holding jurisdictions like Luxembourg have well-established legal and regulatory frameworks and a wide network of double tax treaties. However, […]<\/p>\n","protected":false},"author":2,"featured_media":262,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-260","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-equity"],"_links":{"self":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/comments?post=260"}],"version-history":[{"count":4,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/260\/revisions"}],"predecessor-version":[{"id":265,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/260\/revisions\/265"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/media\/262"}],"wp:attachment":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/media?parent=260"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/categories?post=260"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/tags?post=260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}