Distributor due diligence: licence checks, references and red flags.

General information, not legal advice. Local law varies; take local counsel.

1. Licence and role, in the official register

Every Index profile names the register behind the record, the roles it gives and the date last seen, with a link to the register. This example profile from Brazil shows three roles from ANVISA. Use it as the shortcut, then confirm in the register in the week you sign. Roles are defined in the methodology, the EU importer map explains EUDAMED, and each country page shows the holder rule.

2. Reference calls

Four calls: a current principal, a principal that left, and two customers. Ask:

1. How long have you worked together, and on which lines?
2. Did they hit the targets they agreed?
3. Do they pay on time?
4. Who actually sells and supports the line, by name?
5. What do they report, how often, and how accurately?
6. How did they handle a complaint or a recall?
7. For the principal that left: why, and did the registration and stock move cleanly?
8. Would you appoint them again?

3. Documents to request

• Company registration and ownership, down to the people who own it.
• Device licences, and the registrations it holds for others.
• Quality certificates where they apply, such as ISO 13485 if it services, repackages or relabels.
• The last two years of accounts.
• Warehouse, traceability and recall procedures, and the complaint log.
• Its anti-bribery policy and training records.

4. Anti-bribery

A distributor sits between you and the hospital. If it pays a bribe to win your business, you can be liable. Doctors at state hospitals can count as public officials.

• UK Bribery Act 2010, section 7. A company commits an offence if a person associated with it, meaning one performing services for it, bribes someone to win or keep business for it. That covers agents and can cover distributors. The defence is proving adequate procedures to prevent it.
• US FCPA. The DOJ and SEC Resource Guide expects you to know who a third party is and who owns it, why you need it, that its pay matches real work, and to keep monitoring it.
• Local law. Many markets add their own bribery and healthcare gift rules.

Ask three questions: who owns the company, whether any owner works for a hospital, ministry or tender body, and how tender and event fees are paid. Then put audit rights and an anti-bribery clause in the contract.

Site visit checklist

• Warehouse: licensed, clean, with temperature records if your device needs them.
• Traceability: can they find one lot number in minutes?
• People: meet the reps and specialists who would carry your line.
• Systems: CRM, stock and complaint records actually in use.

Red flags

• Licence not in the register, or under another company name.
• Ownership they will not explain.
• A large upfront marketing or registration fee with no breakdown.
• A margin or commission far above the market, with no reason given.
• Pressure to sign exclusivity before diligence ends.

Depth by risk tier

Worked example

An illustration. A maker of single-use surgical staplers shortlists a Saudi distributor that wants exclusivity and the registration. Exclusivity, the holder role and public tenders put it in the deep tier. The SFDA list confirms the licence and NUPCO awards show it bids. A former principal describes a slow registration transfer. It signs non-exclusive at first, with an independent holder, a transfer clause and a quality agreement, after scoring the shortlist on the selection scorecard.

Distributor yourself? Claim your profile free so principals see current data.

General information, not legal advice. Local law varies; take local counsel.