Legal Tips on Market Expansion

For many startups, the ultimate goal is to scale up and grow bigger, and expansion is inevitable to achieve this. Whether entering new geographic regions, diversifying product offerings, or targeting a broader customer base, expansion offers startups the opportunity to scale and increase their competitive edge. A recent example of this is the Nigerian digital bank, Kuda.

Kuda recently announced an expansion to the UK as part of its major global expansion drive, which includes the UK, Ghana and Uganda as announced by the company. The bank will be joining a league of other Nigerian banks that have expanded their operations beyond the country. The expansion is to provide digital banking services, including direct debits and local transfers, to diaspora Nigerians in the UK. Kuda has partnered with a UK third-party to provide the services, which focuses on cross-border remittance. There are several strategies to consider when considering market expansion for startups. In this article, we discussed some legal tips to consider should you consider expanding your startup to other countries or cities like the renowned microfinance bank.

Tips for Market Expansion

Starting a business in another jurisdiction, and country has its challenges considering that you may not be familiar with the local legislation, language or business culture, and as such, it is important to prepare ahead with operations, and legal efforts. The legal environment of each market differs, and it can be challenging to navigate, especially with complex legal environments. Most startups consider market expansion when the funding stage is at Series C because chances are they are already or almost dominating the present market. Below are some of the important considerations for market expansion.

1.    Research the Regulatory Environment

The first thing to consider is the laws and regulations in the location you’re expanding to. It is important to carry out research on the new regulatory environment to understand the laws and rules that your startup must comply with, as well as the licenses to be acquired. You want to ensure you build relationships with existing players in the new ecosystem. Have a Knowledge of the Regulatory Framework and the rate at which economic realities and policies will be favorable to your startup in the new regulatory climate.

2.    Choose Your Market Entry Route Carefully

There are several options available for entering new market environments. Deciding how to formally expand is crucial because the method of market entry influences how the business is regulated and the legal obligations to be assumed. It is very important to ensure that the structure, and route of entry is appropriate for your business plan. The methods of market entry can vary depending on the country, but common methods include: franchise, establishing a subsidiary company, partnering with a 3rd party for support, amongst others.

3.    Consider Business Structure and Incorporation

As mentioned, the option of establishing a subsidiary indifferent states or countries, or collaborating with existing businesses in the new markets to leverage the extant business’s goodwill in the new market can be explored. It is advisable to identify and establish the best business structure that suits the growing startup, and its mode of operations. Incorporation is very important, and it is the first step in establishing the company, it shouldn’t be done down the line. It is crucial to understand the requirements for establishing, and incorporating a company in the country. Common types of legal entities for foreign businesses are limited liability companies, corporations, and partnerships. Each legal entity and business structure have different obligations and governance requirements.

4.    Intellectual Property

The innovative ideas of the startup must be registered in the new markets, either trademark, patents, copyrights etc. Registering intellectual property is a key element of legal security for business development in countries across the world. It is intended to grant legal protection over the commercialization of your services and products, and gives exclusive rights to the registered signs, logos, ideas, etc. It is also crucial to ensure that you’re not infringing any person or company’s intellectual property rights.

5.    Corporate Compliance Requirements

While expanding business operations, it is important to understand the corporate compliance requirements to avoid penalties or other sanctions that can hinder operations. Corporate compliance varies from country to country, and it includes annual filings, regulatory compliance, and corporate governance practices. It is also a good idea to conduct entity checks. This check will help understand the company’s overall compliance status in relation to government authorities and mitigate risks that could be detrimental to business operations and reputation. For companies expanding across a region at once, all subsidiaries must be checked to ensure compliance.

6.    Seek Legal Advice

Finally, it is advisable that you seek local financial, tax and legal advice before you venture into expanding the business. You want to conduct a necessary investigation, and research into the country of choice. Startup expansion must be a result of an informed decision, and prepared plans, and structures.

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To operate successfully in a new market, a clear market entry strategy and an understanding of basic pillars of legal frameworks will help business development and protect your company’s growth.