Khanani & Kalia International (Pvt.) Ltd.

KKI Franchise Policy

Background & Principles:

Khanani & Kalia International (Pvt.) Ltd., (KKI) is the first Forex House in Pakistan and the pioneer of foreign exchange business in the private sector. KKI was the first licensed Money Changer in the Country and was eventually transformed into an Exchange Company. KKI has always believed in conducting its affairs in accordance with the highest legal and business ideals, with a professional approach and high ethical standards, on account of which, irresistible goodwill, image and reputation revolves around KKI’s name in Pakistan as well as in many offshore countries.

Hence, KKI’s approach in granting Franchise rights to other entities, as permissible under the Foreign Exchange Regulations is very cautious and selective with thorough screening process of the applicants for grant of Franchise rights. More specifically, only those entities which meet with the criteria enunciated hereafter and who are committed to adhere to the laws, rules and regulations and to maintain high ethical standards, would be granted Franchise rights at KKI’s discretion and if granted, such Franchise rights would be continued in accordance with the terms and conditions of the Franchise Agreement, if the principles and policies of KKI are adhered to and consistently maintained.

This policy however, does not guarantee or assure that an Applicant, who meets with KKI’s criteria, will be selected for grant of Franchise rights, since the decision purely vests in KKI’s Management. Therefore, the Application can be declined without having to assign any reasons.

Eligibility Criteria for grant of Franchise Rights:

1. Individuals (whether trading in personal names or as sole proprietors of sole proprietorship concerns), partnership firms, limited companies and corporations, with the individual/proprietor, all partners (in case of a partnership firm) and all directors and controlling shareholders (in case of a limited company and corporation), as the case may be, possessing a good track record and business and educational background, with sufficient experience in the financial, foreign exchange and securities business would be eligible for grant of a Franchise. In particular, Applicants who had possessed Money Changers’ Licenses with at least three years experience and a good track record, would be given preference. Provided however, KKI may at its discretion and based on other lawful considerations, such as undertaking on part of the Applicant to induct professional management in the Franchise business and possessing good family and business background, may also be considered by KKI for grant of Franchise License.

2. The individual/sole proprietor, the managing partner (in case of partnership firm) and the Managing Director or Chief Executive, by whatever name called (in case of a limited company or corporation), as well as the General Manager of the Franchisee, must be graduates from recognized Universities in Pakistan or from offshore Universities or Institutions whose degrees are recognized by the Government of Pakistan. They must further possess a minimum of three years working experience as money changers, bankers or stock brokers and must be familiar with the techniques and know-how of the exchange company business and well versed with the Foreign Exchange Regulations of Pakistan and other applicable laws, rules and regulations. The successors in office of all such persons mentioned above must also be persons who meet with the above eligibility criteria.

3. The individual/sole proprietor, non of the partners (in case of partnership firm) and non of the Directors, the Chief Executive or any of the controlling shareholders (in case of a limited company or corporation) and the General Manager of the Franchisee must not have been convicted by any court or tribunal for any offence of moral turpitude, including fraud, forgery, misappropriation, etc. Affidavits to that effect would be required after the Applicant is selected for grant of Franchise rights.

4. The individual/sole proprietor, non of the partners (in case of partnership firm) and non of the Directors, the Chief Executive or any of the controlling shareholders ((in case of a limited company or corporation) and the General Manager of the Franchisee must not be bank defaulters or involved in serious tax evasion cases. Affidavits to that effect would be required after the Applicant is selected for grant of Franchise rights.

Investment & Capital:

1. A minimum working capital of Rs: 10,000,000/- (Rupees Ten Million only) or equivalent thereof in U.S. Dollars would be required for commencement of Franchise full-fledged Exchange House while a minimum working capital of Rs: 20,00,000/- (Rupees Two Million only) or equivalent thereof in U.S. Dollars would be required for commencement of Franchise Currency Exchange Booth (CEB). The Applicant must therefore substantiate his financial soundness, his ability to invest such minimum amount and the source from which such funds would be raised by him, if the License is granted. The minimum capital requirement shall be subject to change from time to time with mutual consent of both parties depending upon the development and growth of the Franchisee’s business.

2. A non-interest bearing security deposit of an amount as may be prescribed by KKI shall be deposited with KKI before the commencement of the Licensee’s operations, as security for due performance by the Franchisee of its obligations under the Franchise Agreement. The amount will be indicated in the Franchise Agreement. KKI shall have the right to increase the amount of security deposit from time to time, depending upon the business development and growth and the extent of the risk and exposures involved. The security deposit will be refundable upon the termination or revocation of the Franchise, subject to KKI’s right to make any deductions or adjustments against any claims which KKI may have against the Franchisee. No interest, profit or mark-up whatsoever shall be payable to the Franchisee on the security deposit amount.

Royalty:

1. In consideration of grant of Franchise rights for exchange company business by KKI on the terms mentioned above and further detailed terms and conditions to be enunciated in the Franchise Agreement, the Franchisee shall pay to KKI a Royalty @ 10% on net profit by the Franchisee. The Royalty shall be computed monthly and shall be paid to KKI by the 10th day of each ensuing calendar month for which the royalty becomes payable. The first royalty payment shall however commence from the date of the commencement of the operations and end of the last day of that calendar month.

2. The Franchisee shall submit monthly royalty statements on Forms as may be prescribed by KKI with supporting documents, such as photocopies of the bills/receipts/memos issued by the Dealers and counter signed by the General Manager, monthly account statements of all receivables and payables, statement of gross volume of business transacted and such other documents and records as may be required by KKI. These shall be certified as true copies under the signatures of the chief Executive and the General Manager. KKI shall have the right to physically examine and verify the correctness of such statements, accounts and documents at its discretion.

Due Diligence:

Since the Foreign Exchange business has become very complex and risky, utmost care and caution is required to be exercised by an Exchange Company, as well as its Franchisee, so that chances of possible money laundering by unethical and unscrupulous persons are prevented. Therefore, KKI has formulated a comprehensive Anti Money Laundering and Due Diligence Policy Manual (The Manual). The Franchisee will be required to implement and follow KKI’s Policy frame work contained in the Manual in true letter and spirit and in particular, the Know Your Customer (KYC) and due Diligence aspects of KKI’s Policy, in order to ensure safe, secure and transparent flow of business. The Franchisee shall appoint compliance officers to make sure that KKI’s Due Diligence and Anti Money Laundering Policies and procedures are strictly implemented. Special focus should be given to design a proper system of internal control on one hand and on the other to have effective check on money laundering cases by strictly following KKI KYC and Due Diligence Policies and undertaking to that effect may be required by KKI from the Franchisee.

Taxation:

The Licensee shall be liable to pay its own income tax on its income earned through the Franchise business and shall be responsible for filing timely returns and fulfilling all obligations under the Income Tax Ordinance 2001, Income Tax Rules, 2002, Sales Tax Act, 1990, Sales Tax Rules and other applicable laws, rules and regulations.

Premises:

1. The Applicant must identify the location of the Premises where the Franchise Business would be commenced or carried out, in the Application. If such Premises have not been purchased or taken on rent at the time of the submission of the Application, the Applicant must identify the area within which he proposes to commence the Franchise business. If the Franchise License is eventually granted to the Applicant, then the Applicant shall, within a period of three months from the date of the grant of Franchise License and in any case, before the commencement of the operations, acquire or take on long term lease a suitable premises within the same area as was committed by him in the Application, failing which the Franchise would be terminated at KKI’s discretion. Appropriate proof of the acquisition or renting of the Premises shall be submitted to KKI.

2. The Premises will be subject to the prior approval of KKI and the Franchise would become operational only after the Premises have been approved.

3. The entire Premises will be purchased or taken on lease by the Franchisee in its exclusive name and shall be used only for carrying on the Franchise business of KKI as the Exchange Company and for no other business, occupation or other purposes whatsoever.

4. The Premises must not be located, where KKI has its own operations or branches or other Franchisees under Franchises already granted by KKI. This factor clearly should be borne in mind before the Applicant selects the location for establishing a Franchise outlet of KKI and/or submitting a formal Application to KKI.

5. Furnishing and furbishing of the Premises would also be done in consultation with KKI through appropriate interior designer and contractor. The interior space planning, air-conditioning, designing, furnishing, lighting and in particular, the colour scheme shall be subject to KKI’s approvals. The exterior shall also be painted and decorated in accordance with KKI’s approved standards.

6. Appropriate safe deposit vault of the size and specifications as may be approved by KKI must be installed in the Premises with dual lock control system.

7. The Premises shall be equipped with all modern business equipment and facilities, such as cameras, automated security system, computers, fax machines, calculators, telex, telephones, etc. with e-mail and internet connections, satisfactory to KKI.

8. A prominent sign-board, bill-board / name plate will be affixed in front of the Premises near the main entrance, prominently displaying the following:

Human Resource:

1. The Franchisee shall engage appropriate number of managerial and non-managerial personnel as may be decided by KKI, depending upon the size and location of the Premises and the volume of business transacted by the Franchisee. Initially, the Franchisee shall engage the following staff members:

(i) General Manager, possessing qualification as mentioned in Clause II above.

(ii) There should be an adequate number of Dealers at the Counters to attend to the Clients and conduct the foreign exchange transactions as permissible under the law and to maintain appropriate records. The Dealers shall possess such qualification and experience as KKI may consider necessary. The Dealers shall sign the bills/ memos/ receipts, which shall be counter signed by the General Manager after proper verification.

(iii) Qualified and experienced Accountant/Financial Controller for day to day accounting and financial transactions and submission of daily computerized returns of all transactions to KKI with volume, commission/profit earned, names and addresses of customers transacting a business in access of US Dollars or equivalent of Pak Rupees. The Account/Financial Controller shall further be made responsible for preparing and submitting periodical returns to the State Bank as may be required under the prevailing laws, rules and regulations. The Financial Controller or a person specially designated by him for such purpose shall also counter sign the bills issued by the Dealers.

(iv) Supporting clerical staff, including telephone operators, computer operators and peons.

(v) Appropriate number of armed security guards, depending upon the size of Premises and the volume of business transacted, under a contract with a reputable security services company approved by KKI.

2. In recent years, KKI has laid special emphasis to introduce the use of IT in its business field. KKI has always considered IT as a vital tool for development and to improve customer services and bringing IT based culture within the organization. KKI's entire working system is gradually being substituted by hi-tech softwares including Exchange plus for doing all accounting procedures and Remitton for handling remittance transactions. The use of these softwares necessitates hiring IT qualified personnel who can understand their mechanisms and usability. Therefore, the franchisee should have IT literate staff who can work on KKI softwares with ease and command.

3. KKI may, if it considers necessary, provide training or guidance to the Franchisee’s employees. The Franchisee shall make available such employees for training at KKI’s pertinent branch or office.

4. All the managerial and non-managerial employees shall be remunerated timely by the Franchisee who shall be responsible for paying the remuneration and benefits under the applicable laws, including labor laws and the Franchisee shall further be liable to make all statutory contributions under the applicable labor laws. At no stage, any employee, managerial or non-managerial shall be caused to be represented as an employee or agent of KKI.

Conflict of Interest & Confidentiality:

1. Neither the Licensee, nor any of its Directors, controlling shareholders, the Chief Executive or General Manager or any of its staff members, managerial as well as non-managerial, shall be engaged in the business of foreign exchange, whether directly or indirectly or through an affiliate, associate, franchisee, joint venturer, subsidiary company, parent company, holding company, agent, sub-agent, or otherwise as an employee or adviser of another exchange company, money changer, bank, financial institution, stock broker, NBFC, DFI, NBFI, etc., throughout the duration of the Franchise Agreement or its renewals and thereafter for a further period of two years from the date of the termination or revocation of the Franchise. The Franchisee shall obtain written undertakings to that effect from its Chief Executive, General Manager and the Dealers.

2. The Licensee and its Directors, Chief Executive, General Manager and managerial and non-managerial employees shall maintain complete confidentiality of the affairs and business of KKI that may come to their knowledge and at no stage whatsoever any such information which is confidential or sensitive, shall be disclosed to any third party under any circumstances whatsoever, except if directed by any Court, investigating agency, the State Bank or other such appropriate authority or as may be required under the law. The Franchisee shall obtain written undertakings to that effect from its Chief Executive, General Manager and the Dealers.

Procedure:

1. The Licensee shall submit an Application to KKI on the Form annexed hereto complete in all respects, supported by the documents listed in the Form.

2. KKI will process the Application and inform the Applicant within a reasonable time, if his Application is rejected out rightly by KKI without having to assign any reasons whatsoever.

3. If the Application is worth considering in KKI’s sole judgment, then KKI will invite the Applicant for a preliminary interview. The Applicant must bring along all the records and present his credentials at such interview. The interview may have to be followed by two to four successive interviews and meetings for clarification and obtention of further information and documents as KKI may at its discretion consider necessary.

4. The final decision will be made by KKI’s Board. If the Application is rejected by KKI’s Board, the Applicant will be informed accordingly within a reasonable time without having to assign any reason.

5. If the Applicant is selected by KKI’s Board, then the Applicant will have to execute a formal Franchise Agreement in the form and substance.

6. Further formalities shall be indicated to such Applicant during the course of interviews, meetings and at the time of signing the Franchise Agreement.

7. The Application, the interviews and discussions shall be kept confidential by KKI and the Applicant.

(Note: This agreement is vetted by bawaney & partners.)