A structure can be legally sound and financially unworkable.
A structure can be legally sound and financially unworkable. The difference never shows in the organisation chart. It shows in the cash.
At the FONS seminar, Jo Vanbelle set out the legal and tax questions behind the structuring of an international business : which entity operates where, which jurisdiction carries the contracts, how transfer pricing and cross-border responsibilities are organised. Each of those answers also decides something the legal drawing does not show : where the cash sits, who may move it, and how fast. Most groups discover that second set of answers at their first liquidity squeeze.
Three principles that keep a sound structure from becoming a cash trap :
1. Every entity is a cash compartment. Transfer pricing, intragroup services and dividend policy are not only tax decisions ; they are the pipes between the compartments. When the pipes are undersized, unpriced or undocumented, profit accumulates in one entity while payroll falls due in another. The group is solvent. The company that pays the salaries is not.
2. The structure must be tested on the bad quarter, not the good year. For each entity, one question : if revenue drops by a third for one quarter, can it meet its own commitments — and if not, which intragroup mechanism covers the gap, with what documentation, in what delay ? Loan, current account, management fee or capital each carry a different legal, tax and timing cost. Those answers should exist before the quarter happens, because the bank, the tax authority and the court will ask for the paper, not the intention.
3. Consolidation is the price of complexity. Each additional entity adds accounts, banks and a reporting line. Without one consolidated cash position across all entities, refreshed daily, the group knows every balance and no position. A structure is only as well governed as the visibility it maintains.
The strategic lesson is simple. Legal structure and financial structure are two drawings of the same company, and they should be drawn together. The lawyer decides where the risk sits ; the finance function decides whether the cash can follow it. Designed in the same room, the group gets both protection and liquidity. Designed in sequence, it gets the first and loses the second.
That is the working method we are building with Jo Vanbelle and Vanbelle Law Boutique within VB Alliance, through VB Management Solutions : one file, one set of numbers, legal and financial structure designed together.
Jo Vanbelle’s full presentation is available in the Vanbelle Law Boutique article : https://www.vanbellelaw.com/en/post/structural-optimisation-of-international-business-from-a-legal-and-tax-perspective
VB Management Solutions within VB Alliance : https://www.vb-alliance.com/services/management-solutions
Word from the field : the third point is the one that decides the outcome in practice. A group that cannot produce a single consolidated cash position on demand negotiates every refinancing, every tax instalment and every court filing from a weaker position than its structure deserves. Legal structure protects value ; consolidated visibility is what keeps it liquid.