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Monday 13 November 2023

What Contracts Do You Need When Expanding Your Business to the UK?

Original article by Harmanjot Kaur, Associate, LegalVision

Expanding your business to the UK requires preparing legal documents between yourself and third parties that clearly set out each party’s rights and responsibilities.  The contracts you need will depend on the type of business you operate, the sector you operate in and your intended target audience. Ultimately, your contracts help you obtain commercial certainty and manage your liability. Well-drafted commercial contracts are imperative to the success of your business. This article discusses the key commercial contracts that your business may need, depending on the type of business you operate, and key considerations when preparing these documents.

Importance of Commercial Contracts

Commercial contracts are critical for all businesses and will be especially important when you launch your business in the UK. New clients, suppliers, manufacturers, and employees, among other stakeholders, will mean drafting new contracts or reviewing existing ones. 

You may already have contracts in place in your initial jurisdiction of incorporation. However, these will likely need updating to ensure they are appropriate for use in the UK. Therefore, consider having these reviewed by local lawyers before you launch. The laws that apply in the UK may be different to the laws that apply to your existing business. If you do not seek advice from local lawyers before your expansion, you risk failing to comply with these local laws. Breaches can lead to significant penalties, which is less than ideal for a new startup.

The following section explores key contracts your business will need when expanding to the UK.

Non-Disclosure Agreements

A non-disclosure agreement, otherwise known as a confidentiality agreement or an NDA, is a binding legal document requiring one or both parties to keep any information they receive from the other party confidential. An NDA will be particularly useful when you are still in the planning stages of your expansion. It will allow you to discuss your plans with third parties with the confidence that they will not share information with the public until you are ready to make your own announcement. 

What to Consider?

Your NDA should clearly state the terms on which parties are sharing information. When negotiating your NDA, you should consider:

  • what confidential information is being shared. Your NDA should clearly define what is considered confidential; 
  • whether both parties are required to keep the information confidential or just one party; 
  • why confidential information is being shared. Your NDA should outline the purpose for disclosing certain information so that each party can only use the information for that specific purpose;
  • when and in what circumstances a party can disclose confidential information. For example, can they disclose confidential information to their employees who need to know this information? If so, should the employees be subject to similar confidentiality obligations; and
  • how long confidentiality obligations will last. 

Client Agreements

A client agreement sets out the terms and conditions on which you supply your goods and services to your customers. It allows you to manage your risks and liabilities by ensuring your customer knows exactly:

  • what they are receiving;
  • what you expect of them in return; and 
  • the process of resolving disputes.

What to Consider?

Your client agreement should clearly set out:

  • the goods and services that you will be providing, and any specific exclusions from your goods and services;
  • the fees that you expect to receive and the terms on which clients must make payments; 
  • who owns any intellectual property in the goods or services, including any new intellectual property that is created in the course of providing the goods or services;
  • how long the goods or services will continue (for example, is it a one-off supply or will it be ongoing for several years), and how either party can terminate the agreement; and
  • what promises you make regarding the goods or services, and what your obligations or liability will be if the goods or services fail to meet those promises.

You should also consider whether your clients are individual consumers or businesses. If your clients are consumers, you should ensure your client agreement complies with all relevant consumer laws. Importantly, do not include any unfair contract terms that are likely to be considered unenforceable.

Supplier Contracts

Supplier contracts is a catch-all phrase referring to contracts with the third parties that supply you with goods and services. Where you are a goods business, this could include your manufacturer or supplier. Where you are a service provider, this could include your developer or a contractor. These contracts set out the terms and conditions on which you receive goods or services to be able to service your own clients. 

What to Consider?

Terms within your supplier contracts will depend on the type of supplier and the goods or services being provided to you. Similar to your own client agreements, they should set out:

  • goods or services you expect to receive;
  • fees and how they need to be paid;
  • the length of the engagement and how you can get out of it if it no longer suits your needs;
  • the owner of any intellectual property that is created (ideally, this should be you, especially if the deliverables are specific to your business and are being paid for by you);
  • promises the supplier is making to you in respect of the goods or services, including when they will provide them and what level of care they will take in doing so; and
  • remedies if something goes wrong (i.e. what will the supplier compensate you for, and is there a limit on this?). 

Choice of Law Provisions

A choice of law provision, otherwise known as a governing law clause, allows parties to choose the jurisdiction that will govern their agreement. If you are expanding to the UK and setting up a new entity here, you will likely want the governing law to be England and Wales. This is because English and Welsh laws will be the substantive law your new entity will be subject to. It also makes it easier for you to manage any disputes that arise, as you can engage local lawyers for support. 

Key Takeaways

If you are expanding your business in the United Kingdom, it is critical to have the correct contracts in place. Such contracts will protect your assets, such as your intellectual property in any goods or services you provide, and manage your risks and liabilities. Depending on the type of business you operate, your contracts will differ slightly but will largely contain similar provisions. If you have existing contracts from your business in another jurisdiction, consider engaging a legal professional to review them and ensure they are suitable for use in the UK. 

For more assistance drafting or reviewing your commercial contracts ahead of your UK expansion, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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