Direct Sales Application In Malaysia (I)

DIRECT SALES
APPLICATION FOR DIRECT SALES LICENCES
Introduction
These guideline are intended to assist companies which are interested in applying for direct selling business license in accordance with the requirement of the Direct Sales Act 1993 and the Direct Sales Regulations 1993. This document shall not be use in any litigation. These guideline also contain the criteria, which maybe used as a guide when submitting applications for direct sales business licenses, and other procedures for various other application during the license period.

It is hoped that direct sales licenses fully benefit from these guideline in line with three important objectives of the Direct Sales Act 1993 which are:
- Licensing of direct sales activities for the protection of the consumer's rights and interest;
- To promote the growth and development of ethical direct sales activities; and
- To prohibit all activities involving pyramid schemes and ‘ get-rich-quick' schemes.

REMINDER
Before engaging in a direct sales business, you are advised to have a clear understanding of the DIRECT SALES ACT 1993 (DSA 93)

SECTION 4(1) DSA 93
"Subject to Section 14 and 42, no person shall carry on any direct sales business unless it is business incorporated under the Companies Act 1965 and holds a valid license granted Section 6"

SECTION 2 DSA 93
"Direct Sales" means a door-to-door sale and mail order sale within the meaning of this Act.

"Door-to-door-sale" means the sale of goods or services conducted in following manner:-
- A person or any person authorized by him
- Goes from place to place not being a fixed place of business; or- Makes telephone call.
Seeking our persons who may be prepared to enter, as purchaser, into contracts for the sales of goods or services; and

•- That first-mention person or some person then or subsequently enter into negotiations with hose prospective purchaser with a view to the making of such contracts.
"Mail Order Sale" means the sale of goods or services which a person conducts, either by himself of through any person authorized y him, receiving an offer for sale contract by mail.

TYPES OF MARKETING PLAN UNDER A DIRECT SALES BUSINESS
Under a direct selling, there are three types marketing plans as follows:

MULTILEVEL MARKETING PLAN
i. The company recruits/appoint as individual as a member/distributor to distribute the company' goods;
ii. The individual then appoints other individuals to form his network (downline) to sell the company's goods. The process of recruitment of new members/distributors may continue to a reasonable level;
iii. Each member/distributor shall receive a commission / bonus / incentive from his individual sales and from the sales made by his downline members / distributors (overriding bonus).

SINGLE MARKETING PLAN
i. The company appoints sales representative / agents and pays them
salaries/commissions/a combination of salary and commissions on their sales;
ii. The sales representative / agents are not allowed to appoint / sponsor other sales representative / agents.

MAIL ORDER SALES
Sale, by mail, of goods or services which a person conducts, either by himself or through any person authorized by him.

LICENCING CRITERIA
APPLICANT
Subject to the provisions of the Act and the conditions made thereunder as below;
QUALIFICATION
A company incorporated under the Companies Act 1965

PAID-UP CAPITAL 100% BUMIPUTRA
a) Mail Order RM 500,000 RM 100,000

b) Single Level Marketing RM 500,000 RM 100,000

c) Multi Level Marketing RM1,500.000 RM 500,000

d) Foreign-owned companies RM5,000.000 -

MARKETING PLAN
The marketing plans shall have the following characteristics:
•· The business does not carry on or involve a pyramid scheme as specified under Section

7 DSA93.
•· Comply with the Direct Sales (Scheme and conduct) Regulations 2001, which come into

operation on 15 August 2001, that is:
•(a) Presentation of scheme not to be misleading

(i) In the presentation of the direct sales scheme, a person who carries on any direct sales business shall not mislead participants by overemphasizing on disproportionately high bonus or bonus payout.

(ii) Each participants shall be provided with sales kit that includes the marketing plan and code of conduct of the company.

(b) Payment of incentives
Any person who carries on a direct sales business shall provided an incentive based on the volume or quantity of goods or services sold or distributed by each participant and not based on recruitment of persons into the scheme

(c) Participants not to purchase goods or services in an unreasonable amount
Each participants is required to purchase goods or service in an amount that can be expected to be resold or consumed within a reasonable period of time.

(d) Agreement
(i) Any person who carries on any direct sales business shall provide each participant with a

written contract or statement which described the material term of the agreement.

(ii) The agreement shall provide the following:
a. The participant shall be given not less than ten working days from the date of the

recruitment to cancel his membership (Cooling Of Period);

b. Upon the cancellation of his membership under Paragraph ‘a' the participants shall be

refunded all of payment as specified in the agreement; and

c. At the request of the participant, a person who carries on any direct business shall buy

pack any marketable goods sold to the participant with the previous six months at the

price not less than ninety percent of the amount paid. (Company must have a buy back

policy).

d. Any person who contravenes or fails to comply with any provision of these regulation

commits an offence.