Telling the truth about SME life today

6 key legal considerations for companies trading overseas

Selling goods and services overseas can be a ticket to serious growth for UK SMEs, but it’s not simple. David Horne, corporate partner with HBJ Gateley, has helped businesses establish a foothold in the Far East, Middle East, South Africa, North America and Europe, and provides some advice on getting started.

1. Obtain permission to land

Failing to secure the correct visas and work permits for visiting staff, or appropriate trading rights in a given territory, will quickly put paid to your international ambitions.

Few things will be more damaging to your new operation than the authorities shutting you down for non-compliance with basic local requirements. Take the time to get this right.

2. Establish trusted partnerships

Most SMEs can’t afford major investment in property or facilities, so for many businesses it isn’t an option to establish a physical presence overseas. 

It can be more cost-effective to use distributors or agents in the first instance, and some businesses find this is a really good way of growing their presence over the long-term too. But it’s important to have the right contracts in place if you’re relying on a remote representative. 

It can be challenging enough to keep a rein on things in your sales office in Leeds from headquarters in Glasgow, so making sure your sales rep in Istanbul is giving the proper account of your business can be even tougher. 

Make sure you’ve done thorough due diligence to check out track records and trustworthiness.

Be clear about the terms of contracts on any commissions or fees, as well as any limitations on their activities on your behalf. For distributors, consider the terms of any exclusivity deals .

3. Clamp down on corruption

Bribery may be normal business in some overseas territories, but the UK’s Bribery Act makes it clear that even foreign proxies can land UK-based directors in serious hot water that can include jail time. 

Ensure any overseas representatives sign up to your organisation’s anti-corruption rules, and make sure these are suitably robust to satisfy UK authorities.

4. Check your IP

While you might have a unique brand at home, you can easily have a trademark conflict in export markets. Get this checked by a trademark expert; you might need to change the name of your product or service if there exists something similar in your chosen market. 

Product design can also trip you up, so make sure your widget doesn’t encroach someone else’s IP. On a similar note, check your packing complies with local regulations relevant for pharmaceuticals, food and drink and many others.

5. Pay the ferryman

HMRC has strict rules on ?transfer pricing” where one company in a group sells to another in the same group and takes a dim view of those who try to wriggle out of their tax obligations. 

If you sell something to your subsidiary in Brazil for £10, but would normally sell it in the open market for £1,000, the UK tax authorities will insist you pay tax on the usual, higher price. That’s designed to ensure the Treasury gets its fair share on goods and services sold overseas by UK companies. 

Beware of VAT export documentation requirements too.

6. Get good advice

And I don’t just mean legal advice. Reputable local advisers can help you navigate regional customs, government requirements, and help you grow your network on the ground. 

Your advisers in the UK should be able to introduce you to overseas counterparts they know and trust, but be aware of the costs and make sure any advisers will add value to your international activities.

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