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Business law: what to be aware of when expanding abroad

May 22, 2023 | Uncategorised

So you’re planning on expanding your business overseas. Congratulations! But before you head to the bureau de change, several things need addressing.

We live in a global marketplace, sure – one that’s fitted out with universal trading standards like Incoterms to keep goods flowing. But that doesn’t mean that individual countries don’t have very different laws and regulations regarding trade.

It’s a common misconception that if you set up shop abroad, you’re bound only by your own country’s rules. This isn’t true. Customers, suppliers and clients will refer to their own consumer, employment and data protection rights – not yours.

That means you need to do your homework and thoroughly prepare for differences in contracts, accounting, real estate – you name it. Wherever you choose to trade, there’ll probably be a subtle difference you need to wrap your head around.

Expanding overseas is a gamble – but like poker, it’s not all about Lady Luck. For every Netflix, that slowly but surely dominated the overseas market, there’s a Walmart – gigantic at home but struggling abroad.

The UK government’s Department for International Trade has a range of resources available for budding exporters and expanders. But you might also find that you want to seek expert legal advice before rolling up the shutter in Milan or Yucatan.

So without further ado, here are some things you should consider before taking the plunge.

Trade restrictions

Different countries have different tariffs, sanctions and trade restrictions – and they’re liable to change. Staying on top of local legislation in your target market is essential if you want to shift your stock or sell your services.

Tax

Each country has its own tax system – and each tax system is complicated. It can be advisable to seek specialist advice about customs and excise, VAT and any local payroll taxes or social security payments that have to be deducted at source. A financial adviser can also help you to minimise any corporate tax obligations.

Dealing with disputes

In the UK, mediation is the preferred solution to disputes between employer and employee or employer and client – and may end up being obligatory rather than just encouraged.

It’s important to familiarise yourself with the dispute resolution procedures of the country you’re expanding into. Going in blind increases the chance of conflict and unwanted legal costs.

Intellectual property

IP protection from the UK isn’t universally accepted in other countries. For this reason, you should register your trademarks, patents and design rights in the market you’re expanding into. You can register your IP in individual countries, or apply for EU-wide protection if appropriate.

Employment laws

If you’re employing staff in another country, you need to have country-specific contracts that reflect its laws on employment rights. This will include things like trade union activity, statutory minimum employment rights, pensions and the minimum wage.

Contracts

Any contract – whether it concerns employment, B2C or a supplier  – will need to reflect the laws of the country it’s signed in.

Each contract needs to be tweaked to make sure it’s enforceable in your target market. This will include localising terms – in other words, making sure they correspond to local laws and translating them into the relevant language.

Research has suggested that over three-quarters of consumers want to buy from sites that are in their native tongue – even if they have good English. A translation management system can help you to this end.

Data protection

The EU has GDPR and the UK has something similar, enshrined in the Data Protection Act 2018. Other parts of the world, however, have different data protection requirements. Ensuring that you’re collecting and handling data appropriately is a must if you want to avoid a fine, or worse.

Product standards and regulations

Countries have different rules and regs with regard to trade. You need to have them at your fingertips long before you pack your suitcase.

Remember when Brexit led to concerns that British markets would be flooded with chlorinated chicken? That’s just one example of how trade standards differ – and why you as an expanding business need to keep on top of them.

And it’s not just a case of legal obligations – the information that needs to be on a tin of paint, for example. It’s also important to write product descriptions and copy that are suitable for your target market.

Acquisition

If you plan to buy a business that’s based abroad, you’ll need to ensure that everything’s above board. To this end, you’ll need a team of legal, accounting, tax, HR, IT and real estate experts.

Customs and etiquette

It’s not just laws that need to be abided by. There’s also the question of customs and etiquette.

How important is eye contact? Well, in the UK or the USA, it could signal respect and engagement – but in Japan, it could be interpreted as a display of rudeness.

Of course, on today’s transnational trading floor, people are used to working alongside colleagues from different cultures and are mostly happy to accommodate differences.

Even so, it’s worth familiarising yourself with your target market’s business etiquette to minimise the chance of feather-ruffling.

Conclusion

Remember when you set up your business? You probably wore yourself out crossing every t and dotting every i. Expanding your operations overseas requires a similar level of effort, determination and patience – and it’s another gamble.

But as with every side of business life, going in equipped with the facts puts you in a better position to succeed. The last thing you want is to start trading in another country and find that you’re clashing with local legislation.

And as with your operations at home, you can go it alone – but you may find that instructing a commercial solicitor will save you a lot of sleepless nights.

For more than 120 years, Milners Law has offered tailored, affordable legal advice to customers in Yorkshire and beyond. Our team offers a host of trusted commercial law services, from help with contract law to support for new business ventures. Want straightforward legal advice so you can focus on business? Get in touch for a free, no-obligation consultation.

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