There is a particular kind of complexity that I encounter regularly in international structures. It is not the complexity of a business that operates across multiple jurisdictions because its commercial activity genuinely requires it. It is not the complexity of a group that has grown through acquisition and carries the structural residue of each transaction. It is not even the complexity of a structure designed around genuinely competing requirements — tax efficiency, banking acceptability, investor readiness — that are difficult to satisfy simultaneously.
It is the complexity that exists because no one ever asked whether it needed to.
This kind of complexity is easy to recognise once you know what you are looking at. An entity that was established for a specific transaction and never closed when the transaction was complete. A holding layer added because a previous adviser believed it would be useful, without a clear account of what problem it solves. A jurisdiction chosen because it was available and appeared to offer benefits, rather than because it fitted the actual construction. Documentation that describes a structure three iterations out of date. Intercompany arrangements that have not been revisited since the commercial relationships they were designed to govern changed materially.
Each element has a history. None of them, individually, is obviously wrong. Together, they form a construction that is harder to explain than it needs to be, more expensive to maintain than it should be, and more vulnerable to examination than the business it contains actually warrants.
This is complexity that serves no one. And it is, in my experience, one of the most common conditions of an international group that has been operating for more than five years.
The accumulation is gradual and, at each step, rational.
A structure is established for a business at a particular moment. The adviser who designs it responds to the requirements of that moment — the jurisdictions where activity is occurring, the regulatory environment, the anticipated transaction structure, the client's specific concerns about privacy or asset protection or tax efficiency. The design is correct for what is needed. It is also, by necessity, a design for a business that is smaller, simpler, and less mature than the business it will eventually contain.
As the business grows, decisions are made. A new jurisdiction enters the picture — a market, a regulator, a counterparty whose requirements make a local presence valuable. An entity is added. A holding layer is introduced. A subsidiary is established for a specific purpose and continues to exist after that purpose is served, because closing it requires time and attention that are always less urgent than the current priority.
The advisers involved are usually competent. They respond to the requirement in front of them. What they are rarely asked to do is to look at the construction as a whole and ask whether the next addition remains coherent with everything already there. The tax adviser optimises the tax position. The corporate lawyer establishes the entities. The compliance adviser addresses the regulatory requirement. No one is responsible for asking whether the sum of these decisions still adds up to something that makes sense.
Over time, the gap between the structure's original logic and its current form widens. The documentation does not keep pace. The people who understood the original design move on, or move into different roles, and the memory of why things were done the way they were does not transfer. What remains is a construction that functions, more or less, but whose logic is no longer visible from the outside — and, in many cases, no longer fully understood from the inside either.
This is the observation I find most important, and most underappreciated: unnecessary complexity is frequently mistaken for sophistication, by the clients who own it and occasionally by the advisers who built it.
The confusion is understandable. Sophisticated international structures are complex. They involve multiple jurisdictions, multiple entities, intercompany arrangements, and documentation that requires expert knowledge to navigate. If complexity is a characteristic of sophistication, then more complexity might appear to indicate more sophistication.
It does not. The relationship runs in the opposite direction.
A sophisticated structure is one in which the complexity is justified — where each element exists because it serves a specific, articulable function that the business genuinely requires, and where the construction as a whole is no more complex than the requirements demand. The measure of sophistication is not how many entities are in the structure. It is whether each entity can be explained, in plain language, to someone who has no prior knowledge of the business, in a way that makes immediate sense.
A structure that requires an hour of context to explain is not sophisticated. It is obscure. And obscurity, however it was arrived at, has consistent consequences: banking friction, because banks cannot follow the logic; due diligence complications, because investors and acquirers cannot evaluate what they cannot understand; governance failures, because the people who need to make decisions cannot see clearly what they are deciding about; and operational cost, because maintaining entities that serve no function still requires money, time, and professional attention.
The most elegant structures I have built — the ones that have held under the most searching examination — were the ones where the complexity had been reduced to what was necessary and no further. Where every entity had a reason. Where the documentation described the construction that actually existed. Where the logic was visible without explanation.
That is not simplicity. It is discipline.
By the time unnecessary complexity becomes visible to outsiders, it has usually existed for years. The more useful question is how to recognise it from the inside before a bank, investor, or buyer points to it first.
The signals are usually quite concrete. If you cannot explain, without calling an adviser, why a particular entity still exists, that is a signal. If the last full group structure chart is more than two years old, that is a signal. If there are dormant or near-dormant entities in the group and no one is certain how many there are, that is a signal. If intercompany agreements describe commercial relationships that no longer exist in that form, that is a signal. If every KYC review turns into a reconstruction exercise rather than a straightforward explanation, that is a signal.
None of these facts, taken alone, is catastrophic. Together, they usually mean the structure is being carried by history rather than governed by present logic.
Unnecessary complexity has costs that are easy to enumerate but rarely added up.
Direct costs. Every entity in a structure has maintenance costs — registered agent fees, audit requirements, corporate secretarial services, filing obligations. An entity that serves no function incurs these costs in full while contributing nothing. In practice, the annual maintenance cost of a single unnecessary entity is often not dramatic on its own. The problem is multiplication. A group carrying several such entities year after year is paying a meaningful amount for construction that creates work without creating value.
Banking costs. A structure that is difficult to explain generates disproportionate banking friction. Each KYC review takes longer. Each information request requires more preparation. Each new banking relationship requires a more elaborate account of why the structure looks the way it does. The time cost of these conversations — the founder's time, the adviser's time, the management time spent on banking administration — is rarely calculated, but it is consistently significant.
Transaction costs. When a transaction approaches — a sale, a financing, an investment — the due diligence process examines the structure in detail. Unnecessary complexity does not disappear under examination. It multiplies. Every entity without a clear function requires explanation. Every jurisdiction without an obvious rationale generates questions. Every intercompany arrangement that has not been updated to reflect the current commercial reality creates a gap that needs to be closed, either by restructuring under time pressure or by accepting a valuation adjustment from a buyer who prices uncertainty.
Governance costs. A structure whose logic is not legible cannot be managed deliberately. Decisions are made about entities whose purpose is unclear, by people who do not fully understand the construction they are governing. Risks accumulate in corners of the structure that are not regularly examined. The founder who understands the structure because they were present for the decisions that built it becomes the single point of failure for governance that depends on that understanding.
None of these costs appear on a balance sheet. They are paid in friction, in time, in missed transactions, and in the persistent low-level difficulty of managing a construction that was designed for a business that no longer exists.
The work of addressing unnecessary complexity is not dramatic. It does not require rebuilding from scratch. It requires a clear-eyed examination of the construction as it currently exists, followed by a disciplined application of one question to each element: what does this serve, and does it need to continue serving it?
Some elements survive this examination without difficulty. An entity that holds intellectual property, manages a specific set of counterparty relationships, or provides genuine regulatory access to a market has a clear function. The question is answered quickly and the element remains.
Other elements do not survive. An entity established for a transaction that completed three years ago, currently dormant, with no assets and no activity, has no function. The cost of closing it is finite. The cost of maintaining it indefinitely is not.
The more difficult cases are the elements that once served a function and no longer do, or that serve a real function but not efficiently. These require more careful analysis and sometimes genuine restructuring. But they are the exception. In most groups, the greater part of unnecessary complexity can be addressed by closing entities that have no current function, updating documentation to reflect the structure that actually exists, and establishing a governance framework that prevents the accumulation from resuming.
What this produces is not a simpler business. The business is as complex as it is because the commercial activity it contains is genuinely complex. What it produces is a structure whose complexity matches its function — where every element is there for a reason, and the reasons are visible.
That is the standard the examination will apply. A bank reviewing the structure, an investor conducting due diligence, a regulator examining the group — none of them expect simplicity. They expect legibility. They expect to be able to follow the logic. And a construction built around the discipline of reduction gives them exactly that.
The alternative is a construction that answers every question about why it is complex with a history rather than a reason. That history is not a defence. It is an explanation of how the complexity accumulated. And an explanation of accumulation is not the same as a justification for continuation.
Vladimir Shuvalov works with international businesses and private clients on corporate structure, banking acceptability, and cryptocurrency architecture from Nicosia, Cyprus.
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