Doing business overseas with a local partner

Advice  |   9 April 2013

As the UK economy continues to face financial turmoil, many companies are looking overseas when considering expansion.

As the UK economy continues to face financial turmoil, many companies are looking overseas when considering expansion.

If your business is seeking to achieve growth by selling its products or services abroad, many of the perceived obstacles such as routes to market, language, business etiquette and cultural differences could be mitigated by working in collaboration with another business based in the export destination and acting as your ‘local partner’.

A local partner should be well established in the country concerned, and have a comprehensive understanding of the market; be willing to promote your business and provide you with access to customers; share valuable experience, knowledge and skills; and offer practical support and facilitation.

When researching your intended partner and destination you should take time to establish their credentials, ensure compatibility and familiarise yourself with relevant cultural, legal and practical factors that could impact on your proposals.

Discussions and negotiations with your local partner will then enable you to determine whether and how the collaboration will work in detail. At this stage, you may be cautious about disclosing your own business details. However, your position can be supported and protected through a document known as a ‘memorandum of understanding’, combined with a confidentiality agreement, between you and your partner. These will set out your mutual intentions and aims in holding discussions and require each business to keep the other’s confidential information private.

Before embarking on the venture, it will be crucial to establish a firm foundation and protect your interests by entering into a collaboration agreement with your partner. This will form a binding contract, defining and governing your business relationship and the precise nature of the arrangement.

The collaboration agreement, which will have formed part of your discussions and negotiations, should include:

  • the nature and purpose of your relationship, including the status of the parties and the extent of your partner’s authority to act as your representative;
  • how the collaboration will work in terms of roles, responsibilities and the provision of resources and facilities;
  • details of product lines or services to be marketed and sold;
  • how, where and by whom any promotional activities will be carried out, sales closed and contracts performed;
  • the geographic region and sales territory to be covered;
  • agreed rules on exclusivity or non-exclusivity and any restrictions on doing business with competitors or assigning any responsibilities to other parties;
  • the sharing of costs and expenses;
  • arrangements for payments and receipts for products, services and commission;
  • liabilities and the provision of insurance to cover claims against either or both partners;
  • the protection and licensing of any intellectual property rights as it will be essential for you to ascertain and comply with the relevant legal and administrative procedures to protect your rights outside the UK;
  • responsibility for taxes, tariffs or duties which may be governed by international agreements on ‘double taxation’ and UK or overseas regulations;
  • whether your business will work remotely from the UK, set up a branch or deploy people overseas will be influenced by regulations or international agreements as well as tax and cost implications;
  • prohibitions against revealing confidential information to other parties;
  • compliance with legal requirements relating to visas, permits, licences or qualifications;
  • banking and currency issues, having regard to fluctuations in exchange rates;
  • a procedure for dealing with disputes;
  • the duration, extension and termination of the arrangement; and
  • the legal system that will apply to the agreement in case of a dispute.

If both parties wish, the agreement can be amended in the future to reflect changing circumstances. Any sales achieved in the export destination will be the subject of separate contracts with your end customers.

Before signing any formal document or entering into a legal agreement with another business, you should take independent advice from an experienced commercial law solicitor on the overseas jurisdiction, relevant regulations and other matters that might impact on your proposals and interests.

For more information please contact Robert Goddard