Establish a Legal Presence Outside of the United States
Where a local presence is required to enable a project, the start-up could involve Registration of a Related Legal Entity. An agreement with the host country agency or Ministry (often in the form of a Memorandum of Understanding or MOU) can in certain countries satisfy basic regulatory requirements.
An MOU with the appropriate ministries can also help pave the way for obtaining operational support and, possibly, exemptions from import duties and certain taxes (such as Value Added Taxes) and from limitations on visas for expatriate workers.
To operate lawfully in a country, it might be necessary to register with local tax, labor, and other governmental authorities. Determining whether and how to register in a country is a strategic decision made in collaboration with the Office of the General Counsel (OGC), the Finance Department and the University department.
In general, since registration can be a costly and time-consuming process involving the establishment of a new legal entity in the host country, the University will register only if necessary to comply with the country’s laws and regulations, and other alternatives do not meet the needs of the program.
Individual University projects or departments cannot register or "do business" on their own because they are not independent legal entities. The Office of the General Counsel (OGC) will explore options to "do business" in a particular location, advice of local legal counsel.
Typically, Columbia faces five options for doing business outside the U.S., though some of these options are not available in certain countries:
- Do not register, and instead partner with an existing organization in the country.
- Do not register, and instead contract with local vendors to perform activities that require registration. However, in some countries merely outsourcing the work does not eliminate the requirement for Columbia to register.
- Do not register, and limit to activities that do not require registration.
- Register a new Related Legal Entity in the country. This entity will typically be owned or controlled by Columbia University or one or more subsidiaries of the university. Depending on local requirements and needs, the related entity may be a for-profit or non-profit entity. See Related Legal Entities for further details. Incorporating a new Related Legal Entity in the host country involves expensive and resource-intensive steps, and should only be undertaken when necessary. Registration costs are the responsibility of the department.
- Register the Trustees of Columbia University in the City of New York (Columbia’s legal name) to do business in the country. Registering the university outside the U.S. can have serious tax and legal ramifications, and can only be done in conjunction with the Office of General Counsel and the Finance Department.
Certain projects, such as those sponsored by the U.S. government or the host-country government, may be eligible for an exemption from registration in the host country. However, such an exemption should never be assumed.
The OGC also explores whether to seek protections for Columbia trademarks in the country, and the Office of the Treasurer's unit of Insurance and Risk Management reviews insurance needs. The Office of the Controller's Financial Reporting and Operations determines whether any new business units, projects, natural accounts, and/or other information need to be established within the University’s financial accounting system in order to properly track financial data associated with the new registration.
Global Support will help coordinate a comprehensive approach among all University units.
Sometimes the Office of the General Counsel (OGC) will advise that a project’s goals are best enabled through a new Related Legal Entity in the host country.
This entity is typically owned or controlled by Columbia University or one more subsidiaries of the university. The University will appoint a Board of Directors or equivalent body and a senior manager to oversee and manage the entity in keeping with host-country regulations and practices.
Although related legal entities are part of the overall Columbia University network, they are legally distinct from the Trustees of Columbia University in the City of New York and must be operated in keeping with their separate legal and tax status. Working with host-country resources, Finance, and other university departments, the OGC will advise on appropriate measures to meet regulatory and tax requirements.
When Columbia seeks to launch a project or entity outside the U.S., a memorandum of understanding (MOU) between the university and the host country’s government may be required. In some countries, an MOU allows for hiring of staff, obtaining tax exemptions, opening bank accounts, and otherwise operating lawfully in the country.
While an MOU often is appropriate and useful for international activities, any type of agreement with a foreign government can have serious political, financial, tax, and regulatory impacts on the university. In addition, an MOU that purports to grant benefits to the university might in fact be unenforceable and valueless depending on local requirements, as only certain ministries are authorized to grant benefits within their scope of authority.
All MOUs with foreign governments must be reviewed by University’s central administration (e.g., the Provost’s Office for academic programs and Sponsored Projects Administration for sponsored projects), acting with the advice of the Office of General Counsel.
The Template Guidance on MOU with Host Country Government provides sample language and an overview of possible benefits and entitlements that a government might convey through this instrument.