Fix or replace an underperforming distributor, without losing the market.

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

Is the problem really the distributor?

Some causes sit with you. Before you change partners, run the gap through five causes, using data from your last two quarterly business reviews.

If market, price or your support explain most of the gap, a new partner will miss the same target after a costly switch. Replace for capacity and commitment.

Run a 90-day improvement plan

Put it in writing, agreed by both sides. It is a fair chance for them and a record for you if the exit is challenged.

• Days 1 to 10: agree the gap in numbers, the cause, and three to five measurable actions: a named sales person, monthly account visits, demo units placed, every deal in the shared tracker.
• Days 11 to 80: run the weekly and monthly reviews as usual (the operating rhythm), and deliver your side of the plan.
• Days 81 to 90: decide. Back on plan: continue. Partly: narrow the territory, or end exclusivity if the contract ties it to minimums (how that works). No change: exit.

Prepare the exit before you announce it

Once you say it is ending, the distributor stops investing in your line. Have this ready first.

• The contract: renewal date, notice, cause and cure period, convenience, sell-off, stock buyback. Non-renewal at expiry is usually the cleanest route.
• The registration: read the name on the certificate. If the distributor holds it, check the transfer clause and power of attorney, or the new partner cannot import until it moves. See who holds the registration.
• The successor: shortlist and qualify quietly, under a confidentiality agreement, with the selection scorecard. Sign before you announce.
• Stock and customers: warehouse and consignment stock, expiry dates, buyback price, installed base, warranty, open orders.
• Open tenders: a public contract awarded to the distributor is its contract with the buyer, and changing supplier often needs the buyer's consent. Agree who delivers until it ends (tenders).

Worked example: trauma implants in Saudi Arabia

A European maker of trauma plates and screws has an exclusive Saudi distributor that is also the authorised representative holding its SFDA registration. Sales have been flat for six quarters against agreed targets.

The review data rules out price and support. Capacity explains it: one shared sales person, demo sets in the warehouse. The plan asks for a dedicated rep, monthly surgeon visits and both demo sets in use. At day 90 nothing has changed.

The maker decides not to renew at expiry, seven months away. It confirms the transfer clause and power of attorney, then builds a shortlist from the Saudi Arabia orthopaedics page: 18 independent distributors with orthopaedic devices on record (Bastion Hale Distributor Index, build of 25 October 2026). It strikes those with a competing trauma line, qualifies three, signs one subject to the transfer and agrees a buyback for consignment sets. Only then does it serve notice, exactly as the contract requires.

Local law can override your contract

• Registered commercial agencies. Several Gulf states register commercial agents and protect them. In the UAE that is Federal Law No. 3 of 2022, in force since June 2023. If your distributor is registered as your agent, that law applies alongside your contract.
• EU commercial agents. If your partner legally is a commercial agent, negotiating sales in your name rather than buying and reselling, Council Directive 86/653/EEC applies: for open-ended contracts, minimum notice of one month in year one, two in year two and three from year three, plus an indemnity or compensation on termination. The indemnity is capped at one year's average pay over the previous five years. A true distributor is generally outside the Directive, though some national laws protect distributors too.
• Wrongful termination. Skipping the contract's notice and cure steps turns a performance problem into a claim.

General information, not legal advice. Local law varies; take local counsel before you serve notice.

Tell people in the right order

1. The distributor, in a call or meeting, followed the same day by the written notice the contract requires.
2. Customers, once the successor is signed: who supplies, who services, what happens to open orders.
3. The regulator, as soon as the contract allows: the change of registration holder or authorised representative.

What the termination letter contains

An outline, not legal wording. Have local counsel draft it.

• The parties and the agreement, by name and date.
• The clause relied on: non-renewal, convenience or cause. For cause, the breach, earlier notices and the cure period given.
• The effective date, counted as the notice clause requires.
• Sell-off period, stock count and buyback terms.
• Registration transfer steps and deadline, citing the power of attorney.
• Return of demo units, customer data and the regulatory dossier.
• Open orders, tenders and service during handover.
• An authorised signature, sent the way the notice clause requires.

Common mistakes

• Announcing before the successor and registration are ready.
• Terminating for cause with no written record of the misses.
• Forgetting consignment stock and demo sets in hospitals.
• Copying the old contract for the new partner. Fix the holder and transfer clauses this time.