The scenario: six subsidiaries, six separate cash boxes
AseanFood Group runs six subsidiaries in Vietnam, Thailand, Indonesia, the Philippines, Malaysia and Singapore. Each subsidiary holds its own cash, borrows from local banks and trades foreign exchange on its own when paying suppliers. The result: surplus cash earning low deposit rates in one place, funding gaps borrowed at high rates in another, duplicated bank fees across the group, and nobody with a full picture of cash flows. The finance team proposes a regional treasury centre (RTC) in Singapore or Hong Kong. This article sketches the overall model: what an RTC does, where it sits in the group structure, and how it operates.
What does an RTC do? Five core functions
1. Cash pooling and coordination: subsidiaries’ cash balances are concentrated in RTC accounts or netted internally, letting the group use one company’s idle cash to cover another’s needs instead of borrowing externally.
2. In-house bank: the RTC lends to subsidiaries, takes internal deposits and runs multilateral netting, replacing part of the commercial banking relationships, cutting fees and rate spreads.
3. Centralised foreign exchange management: instead of six subsidiaries trading six currency pairs separately, the RTC aggregates demand, executes larger FX deals on better terms and applies a unified hedging policy.
4. Payment factory: all regional supplier payments flow through one hub, standardising processes, reducing fraud and capturing early-payment discounts.
5. Interest rate and liquidity risk management: the RTC monitors the group’s entire debt structure, refinances borrowings and maintains standby credit facilities at group level.
Where does the RTC sit in the group structure?
Three models are common. Model one: the RTC is a direct subsidiary of the parent, providing financial services to all regional subsidiaries under intragroup service agreements. Model two: the RTC sits under a regional holding company, combining equity holding with treasury management. Model three: the RTC doubles as a procurement or distribution hub, pooling cash flows and goods flows together.
For AseanFood, model one usually fits best at the start: clean separation of the finance function, measurable performance, and room to add functions as the group grows. The prerequisite is economic substance: a full-time treasury team on the ground in Singapore or Hong Kong, risk management systems and independent approval processes, not a shell company that merely signs contracts.
Operating through contracts and internal pricing
An RTC cannot simply move a subsidiary’s money. Every relationship must be contractual:
- Cash pooling agreements: the sweeping mechanism, internal interest rates on each subsidiary’s balances, and withdrawal rights.
- Intragroup loan agreements: lending terms, interest rates, collateral if any, respecting each country’s thin capitalisation and interest deduction limits.
- Treasury service agreements: the RTC charges service fees to subsidiaries; fee levels must respect the arm’s length principle.
For the Vietnamese subsidiary specifically, every financial transaction with the RTC is a related-party transaction governed by Decree 255/2026/ND-CP effective 1 July 2026: intragroup lending rates, treasury service fees and cost allocations must all be shown to be arm’s length and properly documented.
Conclusion and action plan
A regional treasury centre upgrades financial governance from “a separate safe in each location” to “one safe for the region”, but it only works with real operational substance and tight intragroup contracts. AseanFood and peers should: (1) inventory all current cash flows and banking costs across subsidiaries; (2) pick the structural model matching their growth stage; (3) build the intragroup contract suite and pricing policy before go-live; (4) prepare transfer pricing documentation for the Vietnamese subsidiary under Decree 255/2026.
Frequently asked questions
How does a regional treasury centre differ from the parent’s finance department?
An RTC is a separate legal entity or operating unit dedicated to providing intragroup financial services to regional subsidiaries under contract, with its own team and systems. The parent’s finance department only manages the parent’s own finances.
Must an RTC have real staff on the ground in Singapore or Hong Kong?
In principle yes: economic substance means a full-time treasury team, risk management systems and independent approval processes. A shell with no real activity will face challenges to the structure’s validity under tax audit.
Do transactions between the RTC and the Vietnamese subsidiary need transfer pricing documentation?
Yes. All financial dealings with the RTC, including intragroup loans, cash pooling and treasury service fees, are related-party transactions under Decree 255/2026/ND-CP and must be shown to be arm’s length with full documentation.
Should an RTC launch with full functions or step by step?
Step by step. Most groups start with cash pooling and centralised FX management, measure results over 12 to 18 months, then expand into in-house banking and the payment factory.
FLAT Law Firm stands with investors
FLAT Law Firm advises on regional treasury centre design: choosing the legal structure, drafting the intragroup contract suite and transfer pricing compliance for the Vietnamese subsidiary. Contact us to assess RTC feasibility for your group.
This article has been quality-reviewed by the FLAW AI Legal Council
