The UK has always been a strategic market for global retailers, with London being a popular City targeted by Canadian retailers. An increasing number of Canadian retailers have already entered the UK market in recent years (with brands including Lululemon Athletica and Herschel now well-established), and new brands are continuing to arrive, including Drake's October's Very Own and Canada Goose.
The three most common routes for Canadian brands to establish themselves in the UK are as follows:
- Incorporating a new UK company There are four main types of companies which can be created:
- Private companies limited by shares, where the members' liability is limited to the amount (if any) unpaid on the shares held by them;
- Private companies limited by guarantee, where the company does not have share capital and the members' liability is limited to the amount that they have agreed to contribute to the company's assets in the event that it is wound up;
- Private unlimited companies, where there is no limit to the members' liability; and
- Public limited companies, where the members' liability is limited to the amount (if any) unpaid on shares held by them (unlike the shares of private companies, the shares of a PLC can be offered for sale to the public).
Of the four types of companies, the most common trading entities established by overseas entities are private companies limited by shares, which are wholly owned by the overseas entity as a 'parent'. The benefits of setting up a brand new company are that it is relatively straightforward, and the brand is able to retain full and total control over the set-up, management and strategy. Things to bear in mind when incorporating a company from scratch are that costs can be high, and there will be formation formalities to comply with (including registration with the Registrar of Companies, applying for licenses (where appropriate), registering for VAT with HMRC (where appropriate), etc.).
- Acquiring an already existing UK company There are two main methods of acquiring an existing UK target business:
- A share purchase, which involves the buyer acquiring all of the shares in the UK company and, thereby, the entire company (including all of its assets, liabilities and obligations); and
- An asset purchase, which involves the buyer purchasing only those individual assets making up the target company as desired.
The benefits associated with purchasing an already existing UK company is that the company is already formed and trading (or ready to trade).
Things to bear in mind are that extensive acquisition formalities and legal documents can lead to a lengthy and costly process, and once an acquisition is complete you may still need to rearrange or restructure the business to suit your needs.
- Establishing a joint venture A joint venture is a commercial arrangement that two or more independent entities enter into, and the three most common joint venture vehicles are:
- A Joint Venture Company ("JVC") which is a separate legal entity from the joint venture parties which set it up;
- A partnership (either a limited partnership or a limited liability partnership); and
- A contractual arrangement.
Things to bear in mind with a JVC are that it will typically be regulated under EU competition law which has the potential to impose onerous procedural requirements, foreign exchange controls may need to be considered, and cross-border joint ventures which involve different countries and different legal systems may lead to difficulties (for example there may be tension between the parties as to which law should govern the relationship).
Significant joint ventures in the UK are often structured as JVCs; joint venture parties will typically transfer assets or entire businesses to the JVC in return for an issue of shares by the JVC. The benefits associated with a JVC are that it gives the joint venture parties complete control over the relationship with customers and the overall strategy, whilst the limited liability nature of the JVC enables unconnected joint venture parties to structure their combined enterprise in a way that limits their exposure to third parties and to each other.