Joanna: Limited risk allocation is a supply chain concept that is often used to optimize a company`s tax position in its business strategy. A standard buy-sell retailer buys goods, holds inventory and then sells those goods to customers. In a limited risk distribution agreement, certain risks are generally borne by the distributor (e.g. B stocks and loss of receivables) are contractually allocated to the client. Depending on his duties and risks, the client earns a larger share of the company`s business margin. This agreement must be used by companies that sell material goods, so let`s take the example of a manufacturer of components for household appliances. The manufacturer is headquartered in Switzerland, but has a German subsidiary that controls distribution and marketing in Germany. The agreement makes the German subsidiary responsible for marketing and distribution in Germany, but limits its risks in terms of storage, product liability and distribution. As a result, a large part of the product goes to the Swiss client. PartnerVine: You mentioned that this agreement applies to material goods, so I guess you can exchange parts for the distribution of other material goods? Limited-risk distributors are a relatively common feature of intercompany agreements within multinationals. The essence of the agreement is obviously to reduce the risk of the role of the intra-group distributor, which leads to a corresponding decrease in the yield or margin for the distributor. In many respects, the distributor`s position is commercially analogous to that of a commercial agent or commission agent.
There are specific provisions you need for electronic products, such as for example. B conditions of delivery, access and transfer of ownership of the products, which we have not mentioned in this agreement. In the case of traditional distribution agreements, the primary pricing mechanism refers to the price of the delivered goods and the amount of the discount to list prices. In addition, the distributor may be required to pay a one-time or annual royalty for the privilege of acting as a distributor, similar to a franchise. Joanna: It`s an internal group document, because the concept of agreement on the limited allocation of risk is usually only used in the context of a group of companies. . . .