New CT Expert Insights Podcast discusses how to maintain critical asset and liability protections

The economic uncertainty wrought by the COVID-19 pandemic has made it more daunting than ever for companies to risk venturing into new business segments. But by structuring itself as a holding company a business entity can help protect itself and its assets from the financial aftermath of a failed venture or legal action. If those same assets are not carefully arranged throughout the larger enterprise, however, the protection a business enjoys can quickly disappear. That’s according to a new episode of Wolters Kluwer CT Corporation’s recently launched CT Expert Insights Podcast.

Sandra Feldman, Publications Attorney at CT Corporation, explains that the popularity of the holding/operating company structure is largely owed to the degrees of separation it provides. So long as a holding company keeps its subsidiaries’ assets isolated from both itself and one another, the fallout of a potential business downturn or legal action remains limited. Feldman uses the hypothetical example of a holding organization that owns two operating companies during the podcast – one a successful manufacturer of widgets and the other a restaurant that is struggling financially due to the pandemic.

“Let’s say the restaurant had to close for a while because of COVID-19 and it ran up debts it’s having trouble paying. The restaurant’s creditors can only look to the assets of the operating company that owns the restaurant to satisfy the debt,” Feldman notes.

With that protection firmly in place, holding companies can invest in new startups or markets without incurring risk to their core businesses. Still, the more operating companies that a holding company owns, the more complex its corporate structure and regulatory obligations will become. For instance, holding and operating companies are subject not only to initial formation fees, but annual compliance costs as well.

Feldman noted that many large holding companies invest in an entity management system to help govern the enterprise. She also urged businesses considering a holding/operating company structure to consult with legal experts who can assist them in weighing their unique set of pros and cons.

“And if they decide to go ahead, CT Corporation is a trusted partner that can help form the holding company and operating companies and also assist with various post formation and compliance needs,” Feldman adds.

For nearly 130 years, Wolters Kluwer CT Corporation has been the leading provider of registered agent services, incorporation services, and legal entity compliance. It is part of Wolters Kluwer’s Governance, Risk & Compliance (GRC) division and has a global reach into over 150 countries. More than 75 percent of Fortune 500 companies, 95 percent of AmLaw 100 law firms, and 350,000 small businesses trust CT Corporation to handle their compliance needs. The other legal services business of Wolters Kluwer GRC is Wolters Kluwer ELM Solutions - a global provider of enterprise legal spend and matter management, contract lifecycle management and legal analytics solutions.

About Wolters Kluwer Governance, Risk & Compliance

Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.

Wolters Kluwer (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2020 annual revenues of €4.6 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,200 people worldwide.

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