Is it mandatory to register with the competent authority when franchising in Vietnam?

Is it mandatory to register with the competent authority when franchising in Vietnam?

According to the provisions of Article 17 of Decree 35/2006/ND-CP supplemented by Clause 2, Article 3 of Decree 120/2011/ND-CP, then:

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 17a. Cases in which registration of commercial franchising is not required

1. In the following cases, registration of commercial franchising is not required

a/ Domestic commercial franchising;

b/ Vietnam-to-overseas commercial franchising.

2. Cases in which registration of commercial franchising is not required must be reported to provincial-level Industry and Trade Departments.

According to this Article, the case of domestic commercial franchising is the case where registration of commercial franchising is not required in Vietnam. You franchise to another province in the country so you don't need to register for a franchise.

Can a franchisee be entitled to sub-franchise to a third party in Vietnam?

Pursuant to Article 290 of the 2005 Commercial Law on sub-franchise to a third party is as follows:

1. A franchisee shall be entitled to sub-franchise to a third party (referred to as sub-franchisee) if it is so consented by the franchisor.

2. Sub-franchisees shall have the rights and obligations of franchisees provided for in Articles 288 and 289 of this Law.

Article 15 of Decree 35/2006/ND-CP provides for transfer of commercial rights as follows:

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.

A franchisee shall be entitled to sub-franchise to a third party in Vietnam if it is approved in writing by the franchisor.

What are procedures for commercial franchising registration in Vietnam?

Article 20 of Decree 35/2006/ND-CP stipulates procedures for registering franchising as follows:

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.

According to detailed instructions in Section II of Circular 09/2006/TT-BTM as amended by Article 6 of Circular 04/2016/TT-BCT, procedures for registering franchising are as follows:

1. Before conducting commercial franchising, traders that intend to conduct franchises, both primary and secondary, shall register commercial franchising with competent agencies defined in Decree No. 35/2006/ND-CP and follow the guidance in this Circular.

2. A dossier of registration of commercial franchising with the Trade Ministry shall comprise:

a/ An application for commercial franchising registration, made according to a set form;

b/ A written description of commercial franchise, made according to a set form;

c/ A copy from the original book or a certified copy or a copy presented with the original for comparison. 

Individuals and organizations directly carrying out administrative procedures at agencies or organizations have the right to choose to submit one of the three forms of copies above of the business registration certificate or investment certificate, in case of commercial franchises from Vietnam to overseas; a copy of the foreign trader's business registration certificate or paper of equivalent validity, certified by a competent agency of the place where the foreign trader is set up, in case of commercial franchises from overseas into Vietnam;

d/ A copy from the original book or a certified copy or a copy presented with the original for comparison. 

Individuals and organizations directly carrying out administrative procedures at agencies or organizations have the right to choose to submit one of the three forms of copies above of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted;

e/ Papers proving the approval of the primary franchisor's permission of franchise in case the trader registering franchising is the secondary franchisor;

3. A dossier of registration of commercial franchising activities with provincial/municipal Trade Services shall comprise:

a/ An application for commercial franchising registration, made according to a set form;

b/ A written description of commercial franchise, made according to a set form;

c/ A notarized copy of the business registration certificate or investment certificate;

d/ A notarized copy of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted;

e/ Papers proving the approval of the primary franchisor's permission of franchise in case the trader registering franchising is the secondary franchisor;

4. Where papers specified at Points b, d and e, Clauses 2 and 3 of this Section are in a foreign language, their Vietnamese translations notarized by state notaries public shall be required. Where copies of foreign traders' business registration certificates or papers of equivalent validity specified at Point c, Clause 2 of this Section are in a foreign language, their Vietnamese translations certified by foreign-based Vietnamese diplomatic representations and consularly legalized according to the provisions of the Vietnamese law shall be required.

5. Receipt of dossiers of registration of commercial franchising activities

a/ Upon receiving dossiers of registration of commercial franchising activities, registration agencies shall issue receipts therefor. Such a receipt shall be made in 3 copies according to a set form, one of them shall be given to the trader registering commercial franchising and two others shall be kept at the registration agency;

b/ For incomplete and improper dossiers, within two working days after receiving the dossiers, registration agencies shall send written notices, made according to a set form, to dossier-submitting traders, requesting the supplementation and completion of the dossiers. The time limit for handling dossiers shall count from the time the traders registering commercial franchising complete their dossiers;

c/ Traders registering commercial franchising may request registration agencies to clearly explain reasons for dossier supplementation and completion. Registration agencies shall have to respond to such requests.

6. Registration of commercial franchising in commercial franchising registration books

a/ Within 5 working days after receiving complete and valid dossiers, registration agencies shall register traders' commercial franchising in commercial franchising registration books, made according to a set form, and send to traders written notices thereon, made according to a set form;

b/ If refusing to register commercial franchising, within 5 working days after receiving complete and valid dossiers, registration agencies shall issue written notices thereon, made according to a set form, clearly stating the reasons therefor;

c/ Registration agencies shall write registration codes in commercial franchising registration books under the following guidance:

+ Codes of forms of franchise: NQR means franchise from Vietnam to overseas; NQV means franchise from overseas to Vietnam; NQTN means domestic franchise.

+ Provincial codes: two characters as guided in Appendix I to this Circular (not printed herein).

+ Serial numbers of enterprises: 6 digits, from 000001 to 999999.

+ Codes are separated with a hyphen.

Examples on making entries in commercial franchising registration books:

+ Company A (making business registration in Hanoi), the third trader that registers domestic franchising, shall have the registration code of NQTN-01-000003.

+ Company B (making business registration in Binh Duong province), the first trader that registers overseas franchising, shall have the registration code of NQR-46-000001.

7. Collection of fees for registration of commercial franchising activities

Upon receiving traders' dossiers of registration of commercial franchising, registration agencies shall collect registration fees under the Finance Ministry's guidance.

8. Re-registration of commercial franchising activities

Where traders having registered domestic franchising defined in Clause 2, Section I of this Circular relocate their headquarters to another province, they shall re-register commercial franchising at the registration agency of the locality where they move to. Registration procedures shall follow the guidance in Clauses 3, 4, 5, 6 and 7 of this Section. Registration dossiers shall also include notices on the approval of former registrations, issued by the registration agency in the locality where traders made business registration. Within 5 working days after completing procedures for registration of commercial franchising at the new place, traders shall notify such in writing to the former registration agency for the latter to issue notices on registration transfer, made according to a set form.

Procedures for commercial franchising registration in Vietnam shall comply with the above provisions.

Best Regards!