A Postcard From Post-Recession America

An Interview with Eric van Aalst and Kevin Pezien of CITCO

Just as we did last year, we again sat down with Eric van Aalst and Kevin Penzien of Citco Corporate Services Inc. (part of The Citco Group of Companies, see box on the next page) to check on the way their clients have managed their overseas subsidiaries during the past recession and what trends and best practices they have observed.

Q: Each of you spent a lot of time on the road to visit a large number of US public companies. What trends have you seen during the past year?

The past recession has been very challenging for Corporate America, and with hiring and budget freezes in place, managing the many responsibilities of a Corporate Secretary’s and/or General Counsel’s office has been a real juggling act. In terms of trends, we have observed two common goals at multinational companies; to keep a lid on global legal spending and to re-tool existing business models to generate efficiencies and cost savings.

Q: Understood; so what benefits can Citco offer multinational corporations?

Basically, we can provide them with one point of contact for many corporate secretarial services for which they may typically have engaged outside counsel. The fact that we offer these clients a global relationship management team –which they can address for all matters relating to their foreign subsidiaries - coupled with the fact that we charge on a fixed fee basis at rates that are significantly less than those of overseas law firms, offers very compelling benefits to our clients. Since we have been providing corporate services to multinational companies for close to 70 years, Citco has a long-proven track record of helping our clients generate operational efficiencies and costsavings.

Q: The outlook at the end of 2008 was pretty bleak. What has helped Citco to preserve its client base, and its own bottom line during the past year ?

The fact of the matter is that in any economic environment, deals still get done and multinational companies continue to expand and invest. Recently, M&A activity has picked up markedly, but even during the dark days in early 2009 there was a lot of transactional activity as corporations acquired or divested businesses. Note that we also do a significant amount of work for multinational private corporations, whose activities many times don’t register on the public radar. During times of changes, we can add value by assisting our clients with valuable support services. For instance, post-acquisition we can perform a corporate health check on entities that they have picked up to determine whether these subsidiaries are in good standing under the laws of their home jurisdiction or – often times – help restore files by retrieving critical corporate documents from overseas public records. For entities that have become obsolete we can offer liquidation services. Another example would be a global name change project, whereby we ensure that the names of global subsidiaries conform to the name of the acquiring corporation.

As a broader development, we have observed an increasing interest on the part of US multinational public companies to identify and manage risk associated with their overseas subsidiaries.

Q: Risk management is a major topic these days. How can Citco assist with this?

Risk management has been a priority for boards and executives ever since Sarbanes-Oxley was introduced, but it has taken on a whole new meaning in the past 18 months.

In all the business divisions of Citco, we have observed a renewed interest in risk management. Whether it concerns transparent reporting and asset verification of alternative investment class assets for institutional investors – Citco Fund Services is the leading administrator of international hedge funds, with a client portfolio of more than US$ 550 billion – or global subsidiary management for multinational corporations, our clients rely on our systems to adhere to “best practices” in terms of risk mitigation. During a corporate health check, we often times pick up administrative deficiencies – officers that have left the company, but were never removed from overseas boards, liquidations that were never finalized, annual returns that were not filed on a timely basis, etc. - that we can remedy to ensure continuous “good standing” of overseas entity portfolios of our clients. Boards have a critical interest in these projects, as they do in other matters that ensure regulatory compliance.

Q: So how big is the international footprint of Citco?

We continue to add offices to our global network of self-run operations to accommodate the needs of our Fortune 500 clients. Since we last spoke, we have set up new operations in Mexico and Chile. Our modus operandi is to offer multinational companies a “single point of contact” through our global client desk, which then interfaces with our own offices around the world, as well as with an established network of agents (in countries where we do not yet have an office presence) to execute the requested service. At the end of the day, Citco will monitor all work and ensure quality of service. This model is very similar to that of international law firms who subcontract with overseas agents and local counsel where necessary. The main benefit that we offer our public company clients – other than the single point of contract – is the cost savings, since we have a fixed-fee pricing model and significantly lower fees for foreign corporate secretarial services.

If you consider the jurisdictions that we cover, it is a real alphabet soup of nations and in recent weeks we have worked on projects in countries as diverse as Australia, Brazil, The Cayman Islands, Chile, Colombia, Finland, Ghana, Hong Kong, India, Ireland, The Netherlands, Norway, Singapore and South Africa to assist our clients. We offer seamless execution across a veritable United Nations footprint between our self-run offices and network of agents.

Q: So who do clients call to connect with Citco?

Just like in any other type of modern business, most client interaction takes place via e-mail. Between our US offices and our global client desk, clients have 24/7 support for their global corporate secretarial needs. As our clients will confirm, the responsiveness of Citco is unsurpassed (we will happily provide client references upon request). This is a result of the long tenure of our staff as well as the time that we have invested to train them. Remember, Citco has been providing international corporate services for close to 70 years and is still owned by its founding family. We take a long term view and the quality of our staff is a reflection of the vision and values of our organization.

In addition to a visit to our website, (www.citcotrust.com) where all our international offices are listed, US based corporations can best contact one of us. Our e-mail addresses are: evanaalst@citco.com (Eric van Aalst, New York City) and kpenzien@citco.com (Kevin Penzien, San Francisco).