DECREE
35/2006/ND-CP
March
31, 2006
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
This
Decree details the provisions of the Commercial Law 2005 on franchising in the
territory of the Socialist Republic of Vietnam.
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.
5. ''Secondary
franchisee" means a trader that receives commercial rights from the
secondary franchisor.
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.
Article
4.
Powers to perform the state management of franchising
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.
Chapter
II. 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
A
trader shall be permitted to receive commercial rights when having the
registration of business lines subject to commercial rights.
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;
b)
Contents of the common franchising contract;
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.
2.
Rights and obligations of the franchisor.
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.
Article
14. Time
when the contract takes effect
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
b)
Its rejection of the transfer of commercial rights by the franchisee for the
reasons specified in Clause 3 of this Article.
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
1.
The franchisee has the right to unilaterally terminate the franchising contract
in cases where the franchisor breaches its obligations specified in Article 287
of the Commercial Law 2005.
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.
Article
18. Decentralization
of responsibility to register franchising
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:
a)
The legal status of the intended franchisor;
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.
2.
Procedures for registering contracts on licensing of industrial property
subject matters shall comply with the provisions of law on industrial property.
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.
Section
4. ACTS OF LAW VIOLATION IN FRANCHISING AND COMPETENCE TO HANDLE VIOLATIONS
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;
h)
Failing to abide by requests of competent state agencies conducting
examinations or inspections;
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
Article
27. Transitional
provisions
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.