starting a company or franchise

Starting a Company or Franchise / Retail Business in the Mekong Region

17 June 2015

“We are pioneers in emerging markets”

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What makes us unique?

20111994 201020061995 2005

Singapore Bangladesh

Indonesia

Lao PDR Cambodia

Myanmar

Thailand Vietnam

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Part 1

Doing Business in the Mekong Region

Mekong Region Key Indicators: GDP Growth

CountryPopulation

2014(M)

2014 GDP per capita

(USD)

2012 GDP Growth

(%)

2013e GDP Growth

(%)

2014e GDP Growth

(%)

2015 GDP Growth forecast

(%)

Vietnam91.5 2,052 5.2 5.4 5.6 5.8

Laos 7.0 1,692 7.9 8.2 7.5 7.8

Cambodia 15.5 1,080 7.3 7.0 7.2 7.2

Source: IMF World Economic Outlook Database, April 2015

2014 Ease of Doing Business Ranking

148

78

135

Source: Doing Business 2015 Fact Sheet: East Asia and the Pacific

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Part 2

Setting up a Retail Business

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Key Legal Framework

– Law on Investment - Law on Enterprises– Law on Commercial– Decree 35/2006/ND-CP on commercial franchise– Circular 08/2013/TT- BCT of Ministry of Industry and Trade on

trading activities

– Investment Promotion Law - Enterprise Law– Decision 0977/MOIC regarding Business on Retail and Whole Trade– Notification No. 1489 regarding Categories of Goods and – Investment ratio open to foreign investors for investment in the

establishment of import business units for wholesales

– The Civil Code– The Law on implementation of certain provisions of Civil Code– Law on Investment– Law on Commercial Enterprises

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Setting Up a Retail Business

100% foreign owned or joint venture or

local

Investment or Joint Venture for

construction or model sales establishment or

local

100% foreign owned or joint venture or

local

Lao nationality

and residing in Lao PDR

Foreign or local companies

Setting

Companies

FranchisingForeign or local

companies

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Part 3

Vietnam – Setting up a Subsidiary or Franchising –

What you need to know

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Establishing a subsidiary

Country LLC1 LLC2+ RO Branch

Vietnam YesLLC (2-50)JSC (3+)

Yes Yes (banks, insurers, securities firms, law firms)

Lao PDR Yes Yes (2-30) Yes Yes (banks, insurers, airlines)

Cambodia Yes Yes (2-30) Yes Yes

Enterprise Structures

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Establishing a foreign invested company

Time frame by law* – In practice, it is longer

Application for Investment RegistrationSubmission

Local Department of Planning and Investment

Investment Registration

Enterprise Registration

Rejection or Supplementation

15 working

days

* Law on Investment 2014

3working

days

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Establishing a local company

Time frame by law* – In practice, it is longer

Application for Enterprise

Registrationsubmission

Local Department of Planning and Investment

Enterprise Registration

Publication

Rejection or Supplementation

3 working

days

* Law on Enterprises 2014

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Franchising

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Franchising in Vietnam

Legal Definition* of Franchising

The sale of goods or provision of services conducted under the business method or format of the franchisor;

Law on Commercial Decree 35/2006/ND-CP on commercial franchise as amended by Decree 120/2011/ND-CP Circular 08/2013/TT- BCT of Ministry of Industry and Trade on trading activities

The business carried out by the franchisee itself;

The business carried out under the trademark and commercial symbol of the franchisor; and

Franchisors entitled to supervise and assist franchisees in conducting their business activities.

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Franchising in Vietnam

Vietnam WTO Commitments:

100% foreign owned permitted;

Necessity to verify Vietnam Commitments under WTO;

Involvement of the Ministry of Industry and Trade

“Economic Needs Test”: permission considered on a case by case basis, depending on number of retail outlets, market stability, population density in the province/city of proposed additional retail outlet, and consistency with the master plan of such province/city.

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Master Franchise vs Sub-Franchise

Global Franchisor

National Franchisee (in Country or Area)“Master Franchise”

Sub-Franchisee Sub-FranchiseeSub-Franchisee

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Registration of Franchising Activities

Time frame by law* – In practice, it is longer

Application for franchise activities

submission

Ministry of Industry and

Trade

Registration Publication

Rejection

5 working

days

Law on Commercial Decree 35/2006/ND-CP on commercial franchise as amended by Decree 120/2011/ND-CP Circular 08/2013/TT- BCT of Ministry of Industry and Trade on trading activities

Franchise Description Document

Including the following information

– Information of franchisor and franchisee: organizational chart, financial status

– Trademark of the goods and services;

– The franchise system, initial and ongoing franchising fees, the number of franchisee currently in operation and the agreement forms; and

– Other mandatory information

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Registration Of Franchising Activities

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Registration Of Franchising Activities

One-year Rule

The franchisee system has been in operation for at least one year.

The Vietnamese master-franchisee of a foreign franchisor must also have conducted a franchise business for at least one year in Vietnam before granting sub-franchise to others

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Mandatory Provisions of The Franchise Agreement

1 Content of franchising

2 Rights and obligations of the franchisor

3 Rights and obligations of the franchisee

4 Price and periodic franchise fees and payment method

5 Term of contract

6 Extension and termination of contract

7 Dispute solution

Franchisor must Franchisee must

– Disclosure the information – Pay franchise fee

– Provide initial training and regular technical assistance

– Invest in facilities, finance, human resources…

– Design and arrange business at franchisee’s expense

– Keep confidentiality

– Comply with the requirements of franchisor regarding design and layout

– Warrant intellectual properties – Stop using intellectual properties of the franchisor at expiry of the franchise contract

– Treat all franchisees equally – Comply with operation system

– NOT to sub-franchise WITHOUT franchisor’s approval

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Legal Rights and Responsibilities

Thank you

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Hanh TranPartner, Vietnam

Deputy Managing Director, Ho Chi Minh City Office

hanh.tran@dfdl.com

Excellence . Creativity . TrustSince 1994

BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R | MYANMAR | SINGAPORE | THAILAND | VIETNAM www.dfdl.com

Excellence · Creativity · TrustSince 1994

BANGLADESH | CAMBODIA | INDONESIA | LAO PDR | MYANMAR | SINGAPORE | THAILAND | VIETNAM www.dfdl.com

Excellence · Creativity · TrustSince 1994

BANGLADESH | CAMBODIA | INDONESIA | LAO PDR | MYANMAR | SINGAPORE | THAILAND | VIETNAM www.dfdl.com