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Tech firms moving international: the legal considerations

It’s Technology Week on Bdaily. Karolina Plent, Senior Associate at Taylor Wessing LLP, shares her expertise on legal issues that tech companies should consider when moving into international markets.

The international market is rich with opportunities and new challenges for UK technology businesses. However, the importance of understanding the legal issues associated with setting up overseas should not be under estimated. The local legal issues will affect every part of the expansion and if these are not thought through properly, the expansion could potentially be very costly.

One of the first steps is to ensure a business obtains advice from a good lawyer who has experience advising overseas companies on the set up requirements. The initial discussions will run through your proposed structure, choice of entity (if required) and the tax implications of your proposed activities in the target country. Failure to have such discussions early on, may result in an unregistered branch being created and double tax charges being placed on the UK company’s profits.

Increasing numbers of tech businesses are expanding internationally without actually establishing a physical presence, through a website/e-commerce platform. This can be a cost effective way of building an overseas presence and the main thing to consider will be to ensure that the website/e-commerce platform and its terms comply with local laws.

However, if a UK company wishes to send one of its key UK based staff to set up a new overseas office, immigration advice should be obtained as a priority, particularly if the UK company is expanding outside of Europe. As work visas can often take weeks or months to arrange, advice should be taken at the earliest stage to plan the visa process and timing of the office opening. Care should also be taken if a UK employee goes to work overseas and continues to contribute to the UK company’s UK pension scheme.

Local employment laws and expectations in terms of remuneration may differ significantly from the UK. Even if an employee is originally from the UK, this employee may automatically obtain local employment law rights by virtue of being based overseas. The UK company may consider that appointing sales consultants is sufficient in the first instance, however, care must be taken to check whether the consultants could be deemed as employees under local law. If a consultant is found to be an employee, the UK company may open itself up to employment claims under local law and there could also be exposure to employment related tax liabilities. It is vital to ensure adequate due diligence is carried out on the people being taken on locally and the local laws applicable to the employment or consultancy relationship.

Another key consideration will be the protection of the UK company’s intellectual property rights (IPRs) overseas, in order to maintain the value of its brand and its technology. UK registered trade marks and patents will not offer protection overseas and so it should be considered whether any IPR protection which a company has in the UK should be mirrored, where possible, in the overseas jurisdiction. It’s also important to make sure that the UK business’s overseas operations do not infringe the rights of third parties by reason of having a presence in that country.

At the same time local and UK data protection laws should be considered, particularly if data is being sent between the UK and the overseas jurisdictions. Non-compliance can trigger negative media, fines, brand damage and regulator enforcement.

It is therefore vital that legal advice is sought as soon as international expansion is considered. Legal planning is essential and in the long run will be the most sensible and cost effective option.

Check out some of the technology week articles, including: Bdaily talks IT technology; the UK tech sector: a health check; the web-developers perspective; Bdaily talks to Care.com; the growth of the UK tech sector; flying ahead in the technology sector; Technology in the security industry; and does the UK technology sector measure up?

This was posted in Bdaily's Members' News section by Taylor Wessing .