Business Representation in Israel
The
dilemma, after choosing the appropriate
representative entity, is to decide whether to do
business through an agent or a distributor.
The
decision depends on the amount of control the
foreign entity wishes to exercise over the
distribution business and the economic risk it is
willing to assume. The agent is obliged to follow the
directives of his principal, while a distributor is
subject to less control and may shield the foreign
entity from customer’s claims since he acts in his
own name and for his own account.
In
simple terms, the main difference between them :
Distributors generally purchase the manufacturer’s
products and agents don’t.
While
many foreign companies work through Israeli agents
and distributors, they aren’t always informed of the
legal implications of entering into relationships
with distributors or agents in Israel, or the rights
and obligations related to ending relationships.
Israel
has no specific laws dealing with “commercial
agents” and distributors, unlike many European
countries which have developed specific statutory
regulations on the subject. However, aspects such as
the form of contract, rights and duties of each of
the parties, termination and compensation
procedures, frequently show similarities to European
countries.
However, because there is no specific Israeli
legislation for determining the duration of the
advance termination notice, the courts make their
decisions on a case-by-case basis while taking into
account the principles of Israeli contract law.
It is
therefore of good policy to use the services of an
experienced and knowledgeable local lawyer during
negotiations and the contract preparation.
In
business practice, the terms “commercial agent” or
“sales representative” are not confined to agency in
the legal sense, but are used to describe a variety
of commercial representatives, e.g., a legal or
commercial agent, an employee or a distributor. (see
definitions) |
Exporters throughout the world are
acquainted with the importance of local
representatives in countries such as
Israel. One must take into account
market conditions, financing
requirements, brand recognition and
different legal regulations etc.