Recognizing the market situation, HT Legal VN would like to share the article below with a legal perspective for customers to refer to when doing franchise business.
I. Legal basis:
- Commercial Law 2005 amended and supplemented in 2017 and 2019 (hereinafter referred to as "Commercial Law 2005");
- Enterprise Law 2020;
- Decree 35/2006/ND-CP detailing commercial law on franchise activities, amended and supplemented by Decree 120/2011/ND-CP and Decree 08/2018/ND-CP (Hereinafter referred to as “Decree 35/2006/ND-CP”);
- Circular 09/2006/TT-BTM guiding the registration of commercial franchising activities is amended and supplemented by Circular 04/2016/TT-BCT (Hereinafter referred to as "Circular 09/2006/TT" -BTM”).
Article 284 of the 2005 Commercial Law stipulates:
“Franchise is a commercial activity whereby the franchisor allows and requires the franchisee to personally purchase and sell goods and provide services under the following conditions:
1. The purchase and sale of goods and provision of services are conducted according to the business organization method prescribed by the franchisor and are associated with trademarks, trade names, business secrets, and business slogans. , business and advertising logo of the franchisor;
2. The franchisor has the right to control and assist the franchisee in running the business.”
The parties' agreement is established by contract. Accordingly, to be able to establish an agreement related to this franchise activity, the franchisor needs to meet the following conditions:
Clause 4, Article 287 of the 2005 Commercial Law, Article 5 of Decree 35/2006/ND-CP stipulates that the franchisor must meet the following conditions:
1. Be a trader according to the law
Clause 1, Article 6 of the 2005 Commercial Law stipulates: "Traders include legally established economic organizations and individuals who conduct commercial activities independently, regularly and have business registration."
Therefore, the franchisor must register to establish an enterprise or business household. However, if the franchisor is a business household, private enterprise, or partnership, the expansion of locations and capital contribution will be limited because the form of liability is unlimited, with all of its assets. about corporate obligations.
2. The business system intended to be used for franchising has been in operation for at least 1 year
Note that 01 year is the number of years of operation of the business system, not the number of years of establishment of the enterprise/business household.
3. Goods and services must be licensed for commercial franchising
Article 7 of Decree 35/2006/ND-CP stipulates:
"1. Goods and services permitted for commercial franchising are goods and services that are not on the List of goods and services banned from business.
2. In case of goods and services on the List of goods and services with restricted business, List of goods and services with conditional business, enterprises can only do business after being granted permission by the industry management agency. Business license, documents of equivalent value or sufficient business conditions.”
4. Ensure intellectual property rights for the subjects stated in the franchise contract
For example: trademarks, trade names, business secrets, business slogans, business symbols, advertising
5. Report/register commercial franchise with the Department of Industry and Trade
Article 17a of Decree 35/2006/ND-CP stipulates:
"1. The following cases do not require franchise registration:
a) Domestic franchising;
b) Commercial franchising from Vietnam to foreign countries.
For cases that do not require franchise registration, reporting must be carried out to the Department of Industry and Trade”.
Up to now, there are no regulations guiding the implementation of this reporting regime, so customers should consult the Department of Industry and Trade where the business is headquartered to comply with the law.
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