- Startups Overseas - Why get a Legal Compliance Analyze before starting your operation abroad?
It’s common knowledge that the Internet has brought many changes to our society. The new technologies have taken down all the borders between the countries, and the world is growing smaller and smaller every day, making it even possible for innovative businesses to have operations in multiple countries.
Most of the companies in the digital economy use the Internet as an important tool for their business model, and take advantage of the Internet to get scalability, which leads sometimes to getting users in different countries.
The hurdles that used to hold ordinary companies back from having operations abroad – like the lack of effective worldwide communication and traditional marketing – have been almost completely eliminated due to new technologies, making it easier than ever for a startup to be linked with various stakeholders in different countries.
Facebook (The Facebook, initially) was meant to be a social media platform only for Harvard students, however, as everybody knows, it’s become a worldwide phenomenon.
The fact is that for some startups, getting users in different countries is something that happens without being properly planed, which can bring some risky situations to the company.
Thanks to different legal systems and rules, some innovative startups struggle greatly overseas, and can even have their operations restricted or prohibited.
For instance, Airbnb’s reach is worldwide, and so are the regulations governing it. While the thousands of cities with Airbnb accommodations mean variety when it comes to deciding where to stay, all of these cities also equally have hundreds of local regulations for renting lodging to guests. It might seem as simple as just listing your place and hoping someone rents it. But it’s not simple, legally speaking.
In New York City, for example, 70 percent of all rentals are illegal according to local laws, as stated by New York Attorney General Eric Schneiderman.
Uber, on the other hand, has been having legal issues in France regarding local regulation for public transportation. In Europe, especially in Germany, Google is struggling to comply with the right to be forgotten. Services like the ones provided by Stubhub.com (US) or Ticketbis.com.es (Spain) might not be considered legal in Brazil, due to a local law that states that a second-hand ticket transaction for the purpose of profit might be a felony.
It’s also common sense that, in many cases, any innovative technology, business model or both needs to deal with the absence of regulation, given the fact that the laws rarely can keep pace with the constant and fast changes brought by innovation.
However, businesswise, assuming risks without knowing them is a posture for amateurs. Professionals identify the risks, made a decision about whether to take those risks or not, and when possible, try to mitigate those risks.
And there is no difference when it comes to legal risks.
A lawyer who regularly works with innovation whether it be technology, business models or both, needs to study the situation and advise his client regarding the legal risks, so his client can made the right decision and, in some cases, can work with his lawyer in order to mitigate
Dr. Márcio Cots
Dr. Márcio CotsLawyer and professor. Partner (foreign legal consultant – outside the US) at CyberlawStudio PLLC, an American law firm based in New York City and Managing Partner of COTS Advogados, a Brazilian law firm based in Sao Paulo. Both law firms specializing in the digital economy (boutique law firm) – focused on startups, e-commerce and IT companies.
Marcio holds various qualifications and has attended executive programs across the United States and Brazil including the Leadership in Corporate Counsel Program, at Harvard Business School - Harvard University and Cyberlaw Program, at Harvard Law School - Harvard University. Marcio is specialized in cyberlaw and is currently focused on providing legal expert advice for e-business and technology companies internationally. He is an expert in matters related to law and new technologies, and is consulted by many companies on issues such as privacy, information security, startups, e-commerce and international digital projects.