Going International with a Compliance Plan



“Global business refers to international trade whereas a global business is a company doing business across the world”. The exchange of goods over great distances goes back a very long time. (Google Definitions). Expanding business into other countries can be exciting and intriguing as well as profitable. 

“Companies expand globally for a variety of reasons- new markets, lower production costs, less competition and to exploit economies of scale, to name a few. Any company looking to expand internationally needs to do its due diligence first. Addressing legal issues are an important part of this advance work.”  http://www.cobizmag.com/Business-Insights/Going-global-Four-legal-issues-you-need-to-consider/

Many companies start their international expansion with sending goods directly to the customer. This strategy is relatively inexpensive, avoids taxation and other legal issues found in other countries. A good freight forwarder helps with beginning to export.

When someone is needed locally, try hiring a distributor or representative. Create a well-drafted distributor or sales representative agreement before hiring.  Trying to operate across time differences can be difficult. Geographical distance can create an emotional distance that prevents progress. The distributor needs to be a self-starter, a problem solver and preferably one that understands both cultures and their legalities.

There are frequent problems with international relationships. Most countries try to protect their workers so firing someone can be expensive and take a long time. A branch office can overcome the lone distributor issues by creating a corporate physical presence in the other country.  The company experiences more control over employee relationships, distribution, and customers. The branch issues include greater expense and the need to understand and abide by local taxes, registrations and employment laws.

If you have patents, trademark registrations, or copyrights in the United States, be aware these rights are probably not legal in other countries. You cannot expect protection in other countries. So analysis of another countries’ intellectual property laws is necessary.  Before doing business in another country apply for these protections. Another protection needed before working with a partner in a foreign country is a contract that prohibits others from registering your IP.  Some countries require you to license your IP to a local partner to do business in the other country.  This can increase your risk of infringements.

In order to avoid ending up in court, a study of the laws and contract law especially is necessary.  In addition, the laws of the USA still apply. One runs into problems when cultures collide. In some countries bribes are a necessary part of the business process and are not prohibited as they are in the Foreign Corrupt Practice Act (FCPA). Companies from the United States and their employees, including overseas agents and their employees, are not allowed to pay bribes to foreign government officials or falsify records to cover up payments no matter what they are called in the foreign country.

A corporate compliance program is defined as a “formal program specifying an organization’s policies, procedures, and actions within a process to help prevent and detect violations of laws and regulations” (ABA, 2010). The advantage of a strong compliance program is that it is proactive in diverting failures and realizing success.  The program is concerned with more than a code-of-conduct since it is an operational program. Ethics remains the center of corporate compliance programs; however, a comprehensive program applies the code to organizational risks and integrates measures addressing risks of fraud. A compliance program is written policies addressing applicable regulations, a listing of values, and expected compliance actions that act like a map.

The corporation diverts disasters, meets objectives, and grows shareholder value through a rigorous compliance program. One method of improved rigor requires avoiding a silo approach to compliance.  Integrating the compliance program using software and addressing cultural issues can ensure the program addresses risks in all areas of the corporation.

The following list of 10 considerations when building an integrated compliance program, is important for reviewing how strong the corporation is.

Ten Compliance Considerations (ABA, 2010)

  1. List all company regulatory and internal compliance needs to examine whether or not all corporate responsibilities are aligned.
  2. Gather internal and external intelligence. Address all levels of operation from executive management to staff and employees. Research includes knowing the latest industry developments and competitor reactions to corporate compliance.
  3. Define objectives or things to accomplish to achieve a goal. This should be a significant part of the periodic strategic planning process.
  4. Conduct a risk assessment. Consider all data from a cause-and-effect standpoint. Identify risks, probabilities, and the significance.
  5. Align controls. Examine processes. Begin looking at policies and procedures within the process to study the risks of each control.
  6. Verify Buy-In and Understandability. Everyone needs to understand their role in compliance. For leaders to understand the program they need to be taught the how and whys for control.
  7. Test cultural support. Gathering data is often accomplished through surveys, independent reviews and entity-level control assessments.
  8. Assess On-Going Compliance. This effort should seek to identify the most-efficient alignment of responsibilities and controls.
  9. Train, Educate and Communicate: Periodic targeted training and compliance information with business units, global functions, external partners, customers, vendors, and other stakeholder groups.
  10. Measure Results and Report to Board: Develop a reporting dashboard to keep management groups and the Board aware of compliance measures, trends and developments.

Companies are concerned when watching huge corporations fail to meet personal ethical standards and small companies worry about their abilities to establish and follow-through with a strong integrated compliance program. Like other programs in the corporation, Compliance begins with one concern and moves on to the next issue. Eventually the review will be complete.


Spitz Legal Counsel LLC serves established businesses and entrepreneurs in organizing, maintaining, protecting and growing their ventures. Contact: mark@spitzlegalcounsel.com.

American Bar Association Business Law Section.

Google Definitions.