Search

Market Entry

Agents & Distributors

Two of the most common market entry methods into overseas markets are via agents or distributors. They know the market in their territory and can potentially give a very fast way of building market share. The two are often confused, but the differences are very straightforward.

Agents: work for a commission, never buy or own the products, and can be controlled by you.

Distributors: buy and sell to make a profit, own the products, and cannot be controlled by you.

One of the most frequent queries is, "Which should I choose, agent or distributor?" There are no hard-and-fast rules, and the answer may well be different for different territories.

The checklist below details things you should bear in mind when looking for a suitable agent or distributor:

Finding the right Agent or Distributor

Background:

  • Size of agency

  • History of agency

  • Number of salespeople, their length of service and qualifications

  • Other agencies held, and success record

  • Banking and trade references

Distribution:

  • Geographical coverage

  • Types of outlets covered and frequency of calling

  • Transportation

  • Warehousing

Are they right for your product?

  • Knowledge of local market conditions

  • Marketing competence

  • Degree of English language skills throughout the organisation

  • Agent's interest in and enthusiasm for new products – and yours in particular

  • After-sales service levels

  • Required skills of salespeople

Once you have chosen an agent or distributor you will want to ensure that your products receive a fair share (or more than a fair share) of the agent's attention.

This can be achieved as follows:

  • Visiting as regularly as is practicable at senior management level – this shows interest in, and commitment to, the agent and the market. This will also provide you with an opportunity to learn about conditions in the market and see how your products are faring.

  • Working closely with the agents to show them how they can profit from your products.

  • Helping to prepare marketing and sales plans for the agent.

  • Providing regular training for the sales staff and after-sales training for the technical staff in the UK.

  • Linking performance to incentives and agreeing milestone targets.


Agents

The best agents are those who know the market, and it's a fair bet that if a potential agent is not already active in the market they will not succeed for you. There are several types of agent but they can be put into three broad categories:

1) A sole agent will be the only agent you appoint in the territory, but it still leaves the way clear for you to sell direct. The sole agent will only get commission for those orders that they have brought in.

2) An exclusive agent will want exclusivity. This way they have no competition and receive commission for all sales made in the territory, whether or not they have assisted in bringing in the order.

3) A non-exclusive agent will normally be appointed where you are not too concerned about splitting the world into territories or having agents compete with each other.

Whenever you appoint an agent make sure you have a contract:

  • Verbal contracts are as binding as formal written contracts.

  • Operation as an agent is sufficient to assume a contract exists.

  • Failure to limit territory or products will lead to unlimited territory for all products.

Within the contract make sure you define:

  • Type of agency

  • Products

  • Market area

  • Territory

  • Targets

  • Commission levels

  • Reporting requirements

  • Negotiating limits

  • House accounts

  • Termination conditions

  • Disputes (arbitration or courts), and

  • Control of IPR.


Distributors

There are really only two types of distributors:

1) Exclusive, where a distributor is given a territory where no other distributor will be appointed.

2) Non-exclusive, where any number of distributors may be appointed in any territory.

Some care needs to be taken in contracts where exclusivity is offered, otherwise the parties can find themselves unwittingly breaching competition policy, an expensive error that can lead to penalties of up to 10% of turnover going back up to three years. This is particularly so if you have a large market share, something easily achieved with a specialist or unique product.

In any contract you should define:

  • Products

  • Territory

  • Targets

  • Promotion strategy and responsibilities

  • Stockholding requirements

  • Forecasting requirements

  • Block exemptions (if exclusivity is granted)

  • Payment terms

  • Use of IPR (intellectual property such as trademarks and copyright), and

  • Termination reasons and conditions.

Do not include:

  • Customer prices

  • Restrictions on markets

  • Restrictions on who else they buy from, and

  • Anything that might distort the operation of a free market.

Distributor termination is not bound by the same regulations as agency termination, but it is often a very fractious and litigious process. Be aware that any notice period must be "reasonable" (three months may be considered reasonable for most products), and damages for breach of contract are unlimited, but must be real.

This information was supplied by Tony Brown of UK Trade & Investment North West. For more information or help with agents and distributors, please email tony.brown@itcgm.co.uk or call +44 7764 836945.

 

Establishing a Permanent Presence – Starting a Business

The main company types in Turkey are the limited liability company, which is appropriate for small and medium-sized enterprises, and the joint stock company, which is more suitable for large-scale investors. Shareholders can be either real persons or legal entities. Foreign businesses can also open a liaison office, and limited liability companies with shared capital can open a branch in Turkey.

To set up a limited liability or joint stock company, it must:

  • Prepare the establishment petition and the notice form and the attachments

  • Have the documents to be attached to the petition notarised where necessary

  • Apply to the Trade Registry Office, providing the above-mentioned documents, and

  • Register the company to the tax office.

Once the required documents have been submitted to the Trade Registry Office the company becomes a legal entity. The company is in operation when it has registered with the tax office.


1) Limited Liability Company

In order to establish a limited liability company, a minimum capital of YTL 5,000 (around £2,000) is required. There can be between two and 50 shareholders, any number of which can be foreign nationals. A limited liability company does not issue a stock certificate. Capital amounts put in by shareholders may vary; however, they should be at least YTL 25 or multiples of this amount.

Preparing the articles of association
The articles of association of a limited liability company must contain the subjects stipulated in Articles 506 and 511 of the Turkish Civil Code. This must be supplied in writing and must include:

  • Full names, addresses and citizenship of the founders,

  • The company's trade name, which must incorporate the phrasing "Limited" (the trade name must not have been previously registered at any registry office, and must be in Turkish),

  • The name and district of the province at which the company's headquarters are located,

  • The company's open address,

  • The company's specific objective and field of activity - a limited liability company cannot operate banking or insurance businesses, and

  • The company's principal capital, capital amounts subscribed by each shareholder, and method and terms of how this capital should be paid.

The articles of association are registered at the Trade Registry Office within 15 days of notarisation. The company becomes a legal entity upon registration.

2) Joint Stock Company

In order to establish a joint stock company, a minimum capital of YTL 50,000 (around £20,000) is required. There must be at least five shareholders. Any number of shareholders can be foreign nationals.

The company's stock capital is divided into shares, and the shareholders' liability is proportionate to the capital paid.

Preparing the articles of association
The articles of association of a joint stock company must contain the subjects stipulated in Article 279 of the Turkish Civil Code. This must be supplied in writing and must include:

  • Full names, addresses and citizenship of the founders,

  • The company's trade name, which must incorporate the phrasing "Anonim Sirketi", which means "joint stock company" (the trade must not have been previously registered at any registry office, and must be in Turkish),

  • The name and district of the province at which the company's headquarters are located,

  • The company's open address,

  • The company's specific objective and field of activity, and

  • The company's capital amount, the nominal value of each share, and the method and terms of the payment of capital.

The articles of association are registered at the Trade Registry Office within 15 days of notarisation. The company becomes a legal entity upon registration.

3) Liaison Office

UK companies can open liaison offices in Turkey, although commercial activities cannot be carried out from such offices. To open a liaison office the company must apply to the Directorate General of Foreign Investments of the Undersecretariat of Treasury at the following address:

Hazine Müstesarligi
Yabanci Sermaye Genel
Müdürlügü
20. Kat Emek
Ankara 06510
Turkey

Application documents
Applications will be finalised within five days, provided that the necessary documents are complete and proper.

The following documentation must be submitted with an application:

  • The original copy of the approved certificate of activity.

  • The company's operational report or balance sheet and income statement.

  • The original copy of the power of authority issued to the person appointed to carry out the operations of the liaison office.

  • The original copy of the power of attorney, in case another person carries out the establishment transactions of the liaison office.

When an establishment permit is granted by the Directorate General of Foreign Investments, the liaison office must register with the local tax office and send a copy of the tax office registration document to the Directorate General within one month. Once registration with the tax office is complete, the office is in operation.

Extensions
Liaison offices are granted permits for a maximum of three years. Successive extensions, also of a three-year maximum can be granted taking into account the office's previous activity and future objectives.

As per the original establishment, applications for extensions will be finalised within five days, provided that the necessary documents are complete and proper.

4) Branch

UK companies based abroad whose capital is divided into shares can open branches in Turkey.

In order to open a branch the company must gain permission from the Turkish Ministry of Commerce and Industry (MoCI). The company must also gain approval from the MoCI in order to open secondary branches, substitute the company representative based in Turkey, change title, address or business type, increase the branch's capital, or close down the branch.

Before applying to open a branch the company must assign a fully authorised representative, who must be a resident in Turkey. Once this has been completed the company must submit a petition to the Directorate General of Domestic Trade of the MoCI. The petition must be stamped by the company and must include the company's date of establishment, nationality and capital amount. It must also include the name, address and nationality of the authorised representative, a letter of commitment pledging that the representative will abide by Turkish laws and regulations, and the address and fields of activity of the branch.

An original copy and a Turkish translation of the following documents must be attached to the petition:

  • The company's relevant organ's decision on the issue.

  • The company's articles of association.

  • An establishment document, which shows where and when the company was established, and upon which country's law system it is based.

  • A certificate of good standing, which shows that the company is still active.

  • A power of attorney assigning the duties of the authorised representative.

All documents must be ratified by a notary public and then legalised by the Turkish Consulate-General in London, or apostilled at the Foreign & Commonwealth Office. Once prepared, all documents should be sent to the Directorate General of Domestic Trade of the MoCI at:

Sanayi ve Ticaret Bakanligi
Iç Ticaret Genel Müdürlügü
Eskisehir Yolu 7. km
Ankara
Turkey

In order to start operating, the following documents must be submitted to the branch's local tax registry office:

  • An establishment petition and notice form

  • Two copies of the power of attorney

  • The MoCI's letter of approval

  • Special documents provided by the MoCI (Müzeyyel Beyanname ve ilani)

  • The authorised representative's identification card or passport

  • The authorised representative's signature circular

  • A letter of commitment confirming that all information provided is correct

  • A chamber registry declaration form, which can be obtained from the Trade Registry Office


Source - Turkish Embassy, London/UK Trade & Investment


 

comments powered by Disqus

Contact Form