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THE
GOVERNMENT
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No:
35/2006/ND-CP
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Hanoi,
March 31, 2006
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DECREE
DETAILING IMPLEMENTATION OF COMMERCIAL LAW 2005 REGARDING
FRANCHISING
THE GOVERNMENT
Pursuant to the Law on Organization of the
Government dated December 25, 2001;
Pursuant to the Commercial Law 2005 dated June 14, 2005;
At the proposal of the Minister of Trade,
HEREBY DECREES:
Chapter I
GENERAL PROVISIONS
Article 1. Scope of
regulation
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Article 2. Subjects of
application
1. This Decree applies to Vietnamese traders and
foreign traders involved in franchising.
2. Foreign-invested enterprises engaged in goods
purchase and sale and activities directly related to goods purchase and sale,
apart from the provisions of Article 7 of this Decree, shall only be allowed to
conduct franchising for goods items of which they are licensed to provide
services of distribution according to Vietnam's international commitments.
Article 3. Interpretation
of terms
In this Decree, the terms below are construed as
follows:
1. ''Franchisor" means a trader that
grants commercial rights, including also the secondary franchisor in relation
to the secondary franchisee.
2. "Franchisee" means a trader
that receives commercial rights, including also the secondary franchisee in
relation to the secondary franchisor.
3. ''Secondary franchisor means a trader
that is entitled to sub-franchise commercial rights it has received from the
primary franchisor to the secondary franchisee.
4. ''Primary franchisee" means a
trader that receives commercial rights from the primary franchisor. The primary
franchisee shall be the secondary franchisor defined in Clause 3 of this
Article in relation to the secondary franchisee.
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6. ''Commercial rights" include one,
several or all the following rights:
a) Right granted to the franchisee by the
franchisor that also requests the franchisee to undertake by itself the
business of supplying goods or providing services within a system set up by the
franchisor and associated with the franchisor's trademark, trade name, business
slogan, business and advertising logo;
b) Common commercial right granted by the
franchisor to the primary franchisee.
c) Right sub-granted by the secondary franchisor
to the secondary franchisee under the common franchising contract.
d) Commercial right granted by the franchisor to
the franchisee under the commercial right development contract.
7. ''Business by mode of franchising"
means business activities conducted by the franchisee under the franchising
contract.
8. ''Commercial right development
contract" means a franchising contract whereby the franchisor grants
the franchisee the right to set up more than one establishment to do business
by mode of franchising in a specified geographical area.
9. ''Common commercial right" means
the right granted by the franchisor to the secondary franchisee, permitting the
latter to sub-grant commercial rights to secondary franchisees that are not
permitted to further grant such common commercial right.
10. ''Secondary franchising contract" means
a franchising contract signed between the secondary franchisor and the
secondary franchisee regarding common commercial rights.
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1. The Ministry of Trade shall be answerable to
the Government for performing the function of state management of franchising
nationwide and have the following duties and powers:
a) To perform the unified professional management
and provide guidance for realization of policies and provisions of law on
franchising; to organize the registration of franchising;
b) To assume the prime responsibility for, and
coordinate with ministries, ministerial-level agencies, Government-attached
agencies and provincial/municipal People's Committees in, inspecting,
controlling, assessing and reporting to competent superior authorities on
franchising;
c) To propose to the Government for promulgation
or promulgate according to its competence or propose amendments and supplements
to legal documents on franchising.
2. The Ministry of Finance shall, within the
ambit of its duties and powers, have to guide the tax regime applicable to
franchising and the fee for registration of franchising.
3. Ministries, ministerial-level agencies and
Government-attached agencies shall perform the state management of franchising
within the ambit of their respective tasks and powers.
4. Provincial/municipal People's Committees
shall have responsibilities:
a) To perform according to their competence the
state management of franchising;
b) To direct provincial/municipal Trade Services
and Tourism Services in organizing the registration of franchising according to
their competence, periodically inspecting, controlling and reporting to the
Ministry of Trade on franchising in their respective localities.
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FRANCHISING
Section 1. CONDITIONS FOR
FRANCHISING
Article 5. Conditions
for the franchisor
A trader shall be permitted to grant commercial
rights when fully satisfying the following conditions:
1. The business system intended for franchise
has been in operation for at least one year.
Where a Vietnamese trader is the primary
franchisee of a foreign franchisor, such Vietnamese trader must conduct
business by mode of franchising for at least one year in Vietnam before
sub-franchising.
2. Such trader has registered franchising with
the competent agency defined in Article 18 of this Decree.
3. The in-business goods and/or services covered
by commercial rights do not violate the provisions of Article 7 of this Decree.
Article 6. Conditions
for the franchisee
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Article 7. Goods and
services permitted for franchising business
1. Goods and services permitted for franchising
business are those not on the list of goods and services banned from business.
2. Enterprises shall be permitted to deal in
goods and/or services on the list of goods and services restricted from
business or those on the list of goods and services subject to conditional
business only after being granted business licenses or papers of equivalent
value by the branch-managing agencies or fully satisfying business conditions.
Section 2. SUPPLY OF
INFORMATION AND CONTRACTS IN FRANCHISING
Article 8. The
franchisor's responsibility to supply information
1. The franchisor shall have to supply copies of
the franchising contract form and the written introduction of its franchising
to the intended franchisee at least 15 working days before signing the
franchising contract, unless otherwise agreed by the parties. Compulsory
contents of the written introduction of franchising shall be specified and
promulgated by the Ministry of Trade.
2. The franchisor shall have to promptly notify
all franchisees of all important changes in the franchising system, which may
affect the latter's business activities by mode of franchising.
3. Where the franchised commercial right is a
common one, the secondary franchisor shall, apart from supplying information
according to the provisions of Clause 1 of this Article, have to notify in
writing the intended franchisee of the following contents:
a) Information on the franchisor that has
granted commercial rights to it;
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c) Method of handling secondary franchising
contracts in case of termination of the common franchising contract.
Article 9. The intended
franchisee's responsibility to supply information
The intended franchisee shall have to supply the
franchisor with information reasonably requested by the latter before deciding
on the grant of commercial rights to the former.
Article 10. Industrial
property subject matters in franchising
1. Where the franchisor licenses industrial
property subject matters and contents of commercial rights to the franchisee,
such a licensing of industrial property subject matters may be established into
a separate section in the franchising contract.
2. The section on licensing of industrial
property subject matters in the franchising contract shall be governed by
industrial property law.
Article 11. Contents of
the franchising contract
Where the parties choose to apply Vietnamese
law, a franchising contract may have the following principal contents:
1. Content of franchised commercial right.
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3. Rights and obligations of the franchisee.
4. Price, periodical franchise fee and mode of
payment.
5. Valid term of the contract.
6. Renewal and termination of the contract, and
settlement of disputes.
Article 12. Language of
the franchising contract
Franchising contracts must be made in
Vietnamese. For franchises granted by Vietnamese parties overseas, the language
of franchising contracts shall be agreed upon by the involved parties.
Article 13. Valid term
of the franchising contract
1. The valid term of a franchising contract
shall be agreed upon by the involved parties.
2. A franchising contract may be terminated ahead
of the agreed time in the cases specified in Article 16 of this Decree.
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1. A franchising contract shall take effect as
from the time it is entered into, unless otherwise agreed upon by the involved
parties.
2. Where a franchising contract contains a
section on licensing of intellectual property subject matters, such section
shall take effect according to the provisions of law on intellectual property.
Article 15. Transfer of
commercial rights
1. The franchisee may transfer commercial rights
to another intended franchisee when the following conditions are satisfied:
a) The intended transferee satisfies the
conditions specified in Article 6 of this Decree;
b) Such transfer is consented by the franchisor
that has granted commercial rights to the transferring franchisee (hereinafter
referred to as the direct franchisor).
2. The franchisee must send a written request
for transfer of commercial rights to the direct franchisor.
Within 15 days after receiving such written
request of the franchisee, the direct franchisor must reply in writing, clearly
stating:
a) Its consent to the transfer of commercial
rights by the franchisee; or
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Past the above-said time limit of 15 days, if
the direct franchisor fails to reply in writing, it shall be deemed as having
consented to the transfer of commercial rights by the franchisee.
3. The direct franchisor may reject the transfer
of commercial rights of the franchisee for one of the following reasons:
a) The intended transferee fails to fulfill its
financial obligations under the franchising contract;
b) The intended transferee has not yet satisfied
the criteria for being selected by the direct franchisor;
c) The transfer of commercial rights may exert a
great adverse impact on the existing franchising system;
d) The intended transferee disagrees in writing
to fulfill the obligations of the franchisee under the franchising contract;
e) The franchisee has not yet fulfilled the
obligations toward the direct franchisor, except here the intended transferee
makes a written commitment to fulfill such obligations on the franchisee's
behalf.
4. The transferor of commercial rights shall no
longer hold the transferred commercial rights. All rights and obligations
related to commercial rights of the tranferor shall be transferred to the
transferee, unless otherwise agreed.
Article 16. Unilateral
termination of the franchising contract
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2. The franchisor has the right to unilaterally
terminate the franchising contract in the following cases:
a) The franchisee no longer holds the business
license or papers of equivalent value, which the franchisee is required by law
to hold for conducting business activities by mode of franchising.
b) The franchisee is dissolved or goes bankrupt
according to the provisions of Vietnamese law.
c) The franchisee commits serious law
violations, which may greatly harm the reputation of the franchising system.
d) The franchisee fails to remedy its immaterial
breaches in the franchising contract within a reasonable time limit, though it
has received a written notice from the franchisor requesting the remedying of
such breaches.
Section 3. REGISTRATION OF
FRANCHISING
Article 17. Registration
of franchising
1. Before conducting franchising activities,
Vietnamese traders or foreign traders that intend to franchise must register
franchising with competent agencies defined in this Decree.
2. Agencies competent to register franchising
shall have to register franchising of traders in the franchising register and
notify in writing the traders of such registration.
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1. The Ministry of Trade shall register the
following franchising activities:
a) Franchisings from overseas into Vietnam,
including franchisings from export processing zones, non-tariff areas or
separate customs areas specified by Vietnamese law into the Vietnamese
territory;
b) Franchisings from Vietnam to overseas,
including franchisings from the Vietnamese territory into export processing
zones, non-tariff areas or separate customs areas specified by Vietnamese law.
2. Trade Services and Trade-Tourism Services of
provinces or centrally-run cities where traders that intend to franchise make
business registration shall register franchising at home, except for
franchising across boundaries of export processing zones, non-tariff areas or
separate customs areas specified by Vietnamese law.
Article 19. Dossiers of
application for registration of franchising
A dossier of application for registration of
franchising comprises:
1. An application for registration of
franchising, made according to the form guided by the Ministry of Trade.
2. A written introduction of franchising, made
according to the form set by the Ministry of Trade.
3. Written certifications of:
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b) Industrial property right protection titles
in Vietnam or a foreign country in case of licensing industrial property
subject matters for which protection titles have been granted.
4. Where papers specified in Clauses 2 and 3 of
this Article are written in foreign languages, they must be translated into
Vietnamese and notarized by domestic notaries public or Vietnam's foreign-based
diplomatic missions and consularly legalized according to the provisions of
Vietnamese law.
Article 20. Procedures
for registering franchising
1. An intended commercial franchisor shall
register franchising according to the following procedures:
a) Sending a dossier of application for
registration of franchising to the competent state agency defined in Article 18
of this Decree;
b) Within 5 working days after receiving
complete and valid dossier, the competent state agency shall register
franchising in the franchising register and notify in writing the traders of
such registration.
c) Where the dossier is incomplete or invalid,
the competent state agency shall, within 2 working days after receiving such
dossier, notify such in writing to the intended franchisor for supplementation
and completion of its dossier;
d) The time limits specified in this Clause
shall not include the time for the intended franchisor to amend and supplement
its dossier of application for registration of franchising;
e) Past the time limits specified in this
Clause, if the competent state agency refuses to effect the registration, it
must notify such in writing to the intended franchisor, clearly stating the
reasons for refusal.
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Article 21. Notification
of changes in registered franchising information
Where there are changes in registered
information specified in Clauses 2 and 3, Article 19 of this Decree, the
franchisor shall notify such changes to the competent state agency where it has
registered franchising within 30 days after such changes arise.
Article 22. Revocation
of franchising registrations
1. A trader's franchising registration shall be
revoked in the following cases:
a) The trader terminates its business operation
or shifts to another business line;
b) The trader has its business registration
certificate or investment certificate withdrawn.
2. The agency that has effected the franchising
registration shall publicly announce such registration revocation.
Article 23. The
franchising registration fee
Intended commercial franchisors must pay the
franchising registration fee. The fee rates and regime of fee management and
use shall comply with the Finance Ministry's guidance.
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Article 24. Acts of law
violation in franchising
1. Traders involved in franchising that commit
the following acts of violation shall, depending on the nature and seriousness
of their violations, be administratively sanctioned according to the provisions
of law on handling of administrative violations:
a) Conducting franchising business without
having fully satisfied the specified conditions;
b) Granting franchisings for goods or services
banned from business;
c) Breaching the obligation to supply
information in franchising specified in this Decree;
d) Including in written introductions of
franchising untruthful information;
e) Violating regulations on registration of
franchising;
f) Violating regulations on notification in
franchising;
g) Failing to pay tax(es) according to the provisions
of law, but not seriously enough for penal liability examination;
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i) Violating other provisions of this Decree.
2. Where traders conducting business by mode of
franchising commit acts of violation, causing material damage to involved
organizations and/or individuals, they must pay compensations therefore
according to the provisions of law.
Article 25. Competence
and procedures for handling administrative violations
Competence and procedures for handling acts of
administrative violation specified in Article 24 of this Decree shall comply
with the provisions of law on handling of administrative violations.
Article 26. Complaints
and denunciations
1. Organizations and individuals may complain
about the registration of franchising, payment of taxes and fees, inspection
and handling of violations in franchising activities according to the
provisions of law on complaints.
2. Individuals may denounce acts of law
violation in franchising according to the provisions of law on denunciations.
Chapter III
IMPLEMENTATION
PROVISIONS
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Franchising activities conducted before the
effective date of this Decree must go through procedures for registration
according to the provisions of this Decree within 3 months after such effective
date.
Article 28. Implementation
effect
1. This Decree takes effect 15 days after its
publication in CONG BAO. To annul all previous stipulations on franchising
which are contrary to the provisions of this Decree.
2. Ministers, heads of ministerial-level
agencies, heads of government-attached agencies and presidents of
provincial/municipal People's Committees shall guide and implement this Decree.
ON BEHALF OF THE GOVERNMENT
PRIME MINISTER
Phan Van Khai