Establishing A Business In The EU: Where To Start?

EU picture for The NextWomen article by Charles Hylton-PottsThe European Union (EU) represents an alternative land of opportunity: a single market of 500 million people and a European dream of business, history and culture.

Whether you are an existing business looking to expand into the EU or researching the best place to start up your new venture, leaping into a different jurisdiction can be a daunting prospect, but it need not be.

In a series of articles, lawyer Charles Hylton-Potts will cover a range of legal topics relevant to establishing your business in the EU, whilst underlining the importance of planning, understanding legal considerations and ensuring you have the right documentation in place.

First, where do you start?

1.            Location

The EU now, following the accession of Croatia on 1 July 2013, comprises 28 different countries.  Whilst the EU is a single market promoting the free movement of goods and people with harmonised standards and reduced bureaucracy, each country has different systems, reputation, language and culture which will affect your decision on where to locate your business.

If language is important, North Americans have the obvious options of the UK and Ireland, whereas Latin Americans may prefer Spain or Portugal. More likely, your ideal location will be where has the best reputation for your sector, for example, London for Tech City or financial services, Paris or Milan for fashion; the greatest potential market for your goods or services; or the lowest corporate tax rate, such as the competitive 20-23% of the UK or the rock bottom 12.5% of Ireland.

2.            Immigration

Your next consideration will be how to get yourself and your key people into the country: what visas or licences you need in the short and medium term. There will be restrictions on what business activities you can carry out before these are in place.

Requirements differ from country to country so local advice is essential. If you turn up at the airport and answer any questions incorrectly, you may be sent back on the next flight and have a black mark in your passport.

3.            Structure

Once you have a foot in the door, it is time to choose the structure for your start-up or subsidiary, most likely a limited liability company. Local experts can advise on the most efficient structure for you and how best to move your profits back home.

Alternatively, you might decide that you would rather rely on others to handle your expansion, such as an agent, a distributor, or by franchising. Note that if you take the agency route, you will be bound by EU legislation that exists to protect commercial agents.

4.            Employment

Who do you need on the ground? No doubt you will want to recruit employees with local knowledge or junior staff to handle day-to-day operations, but there is a lot more to it.  

Employment law has some harmonisation in the EU in areas such as collective redundancies, discrimination, equal pay, working time and parental leave (including maternity leave). 

Each country, however, has different origins for the remainder of its laws but generally employee protection rights and employer obligations are significantly greater than in the US for example. There are restrictions on the termination of employees, often a prescribed reason and protracted process being needed to do so and there will also be a notice period to adhere to.  

5.            Contracts 

Regardless of your offering, you will need terms and conditions for the provision of your goods or services to your customers. Existing contracts at the least may need translation but, more importantly, for these or any new contracts, a local lawyer should be involved to ensure they are appropriate for and legally enforceable in the EU country you select.

6.            Intellectual property

Often the value in a business derives from its IP that must be protected at all costs in any jurisdiction, whether by registration, enforcement or protection using non-disclosure agreements and other contracts. 

Your brand name or logo is unlikely to be known in the EU so you may not be able to enforce against another business using them. Trade mark registration is the solution: this may be done on a national level or an EU level covering you in all its member states. You should carry out searches to check that your brand name is not already taken.

Employment contracts are a key document to protect confidential information and trade secrets but the different laws on confidential information and restrictive covenants can be technical and uncertain. f IP is important to you, be sure to speak to a specialist.

7.            Data Protection

The EU has a harmonised, tough data protection regime with heavy penalties for serious failures.  Collection and processing of certain data about natural persons must be compliant with a number of principles and there are a variety of rights that can be enforced against the organisation controlling the data. There are additional rules for direct marketing, the use of cookies and online behavioural advertising.

From an international aspect, personal data cannot be transferred out of Europe unless the country to which it is being transferred has an approved level of protection, adequate safeguards are put in place to protect the data and rights, or one of a number of conditions is met.

The above are just a selection of legal matters to consider when building a business in EU. Careful planning of every aspect is of paramount importance, including a proper business plan and market research, raising sufficient finance, registration of your business, tax planning, opening bank accounts, setting up a payroll function, renting and furnishing premises, arranging any necessary licences, and putting in place the necessary IT systems. 

Disclaimer: This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances and no liability is accepted by the author or Redfern Legal on the basis of this article.

Charles Hylton-Potts is a lawyer at Redfern Legal based in London specialising in corporate, commercial and real estate matters, particularly for businesses setting up in or moving into the United Kingdom. In addition to those services, Redfern Legal provides a full range of business legal services to support inward investment into the UK including business immigration and employment law advice.

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