There are many reasons for businesses looking to develop or expand their markets and sales beyond UK shores, explains Mark O'Shea Commerce & Technology Team, including:
- Virgin markets with strong demand
- Developing new sources of revenue
- Taking advantage of favourable exchange rates
- Supplying leading edge technology/services
- High domestic prices affecting UK sales
- Mature/saturated domestic market/stiff domestic competition
Taking the plunge can require a degree of nerve, but what factors do you need to consider when doing so?
1) Do you intend to sell your products direct from the UK?
- Are you intending on making direct sales from the UK, for example via your website? If so, what restrictions are there on selling on-line to overseas customers?
- Can you refuse to supply to customers in certain countries? Are there embargoes on selling/supplying particular products into some countries?
- What terms and conditions can you/should you impose on your customers (whether businesses or consumers)?
- What rights do customers have to reject goods, whether for defects or otherwise?
2) Or do you intend to appoint a local agent or distributor?
- If you intend appointing an agent, how will you identify a suitable agent to represent your business?
- What is the agent's remit? Are they authorised to bind you to a sale contract?
- Can you prevent the agent/distributor from selling and/or promoting competing products or services?
- How will the agent be remunerated?
- What local laws will you need to comply with when appointing an agent?
- Will the agent be entitled to compensation or other recompense when the agency comes to an end, e.g. under the Commercial Agents (Council Directive) Regulations 1993 or their local equivalent? Do you need to make financial provision for this?
- How can you be sure the agent is conducting business in accordance with your ethical standards and anti-corruption policies and laws?
- If you appoint a distributor, how does this differ from an agent?
- Will the distributor be appointed on an exclusive or non-exclusive basis?
- What discount will the distributor receive on purchases from you?
- Is the distributor entitled to compensation or other recompense on termination?
- With agents or distributors, how should you deal with underperformance?
- What are your termination rights and what country's law governs the contract?
3) Or will you set up a local subsidiary company or branch office?
- What are the legal formalities for either option? How much will it cost?
- Will you set up a stand alone company locally or will it be within your existing group structure?
- Do you have to have shareholder and/or director resident in the relevant country?
- What are the tax considerations?
- Is franchising or licensing a better option?
4) What do you need to do to protect your intellectual property rights?
- What can or should you register/protect?
- How should you go about registering/protecting your patents, trade marks or other IPR? How much is that going to cost?
- Should you licence IPR from the UK? Should you set up a separate company to hold and/or licence your IPR?
- Do you need confidentiality undertakings to protect your know-how / trade secrets?
5) What contracts should you put in place?
- What terms and conditions should you have?
- Do you need an agency / distribution agreement? If so, what terms should you include and will you need local legal advice on that?
- What other documentation do you need to put in place?
- Do you need to comply with data protection and distance selling laws?
- Does your product liability insurance cover sales made outside of your usual markets?
6) Do you need to ensure that you have registered local trade marks/domain names?
- Should you register trade marks / domain names locally in the relevant countries?
- Or can you let the agent or distributor do so? If yes, how do you get these back when you terminate or end your relationship?
7) On termination, what do you need to ensure?
- Do you need to have a non-solicitation clause? Will it be enforceable?
- Can you get hold of customer lists?
- How can you ensure that the agent/distributor returns or destroys any confidential information or data?
- Can you oblige the agent/distributor to assist your transition to your new agent/distributor?
Many of the answers to these questions can be determined through your due diligence, but some will require specialist and/or local legal advice and support.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
