| Management Measures on Commercial Special Permission Business |
| Thursday,March 17,2005 Posted: 14:24 BJT(0624 GMT) |
| Chapter 1 General Principles
Article 1 For the purposes of regulating activities in special permission commercial business, safeguarding legal rights and interests of the persons concerned, promoting commercial special permission business to develop healthily and regularly, the said measures are hereby formulated. Article 2 Commercial special permission business referred to in the said measures (hereinafter referred to as “special permission business” means franchisors authorize franchisees trademarks, trade names, operation pattern and other operation resources that they have the rights to authorize others to use by signing a contract. Franchisees do their business under uniform business system in accordance with the contract. Article 3 Carrying out special permission business in the territory of the People’s Republic of China applies to the said measures. Article 4 Franchisors may authorize directly the rights of special permission business to franchisees in accordance with the agreement of the contract. The franchisees invest in network of special permission business to do their business, but they must not transfer the rights of special permission business to others. Franchisors may also authorize sole rights of special permission business in a certain area to franchisees. Franchisees may authorize the rights of special permission business to other applicants, or establish special permission business network of their own in the area. Article 5 Special permission business should be carried out in accordance with the laws and regulations of the People’s Republic of China, follow the principles of voluntary participation, fairness, honesty and self-confidence, must not do harm to consumers’ legal interests. Franchisors are not allowed to do illegal pyramid selling In the name of special permission business. Franchisors must not cause market monopolizing and hinder fair competition while they are carrying out commercial activities in the form of special permission business. Article 6 Ministry of Commerce supervises the activities of special permission business all over the country. Competent commercial authorities at all levels supervise the activities of special permission business in the area under their jurisdiction. Chapter II Persons concerned in special permission business Article 7 Franchisors should meet following requirements: 1. The enterprises or other economic organizations established in accordance with laws; 2. Have business resources of trademarks, trade names and operation pattern that they have the rights to authorize others to use; 3. Have the ability to provide franchisees with long-term business guidance and service training; 4. Have at least two direct trade names operating for more than one year or direct trade names established by their sub-company or holding company; 5. If special permission business needs franchisors to provide goods supply, franchisors should have stable goods supply system that can assure the quality, and can provide corresponding service; 6. Have fine prestige and no record of cheating in the form of special permission business. Article 8 Franchisees should meet following requirements: 1. The enterprises or other economic organizations established in accordance with laws; 2. Have the funds, fixed place and personnel adapting to special permission business; Article 9 Franchisors have following rights: 1. Supervise business activities franchisees in accordance with the agreement of the contract for the purposes of assuring the unity of special permission business system and the unity of the products and the quality of the service; 2. Cancel the qualification of special permission business of the franchisees who act contrary to the provisions of the contract of special permission business, encroach franchisors’ legal rights and interests, sabotage the system of special permission business in accordance with the agreement of the contract; 3. Collect funds and cash deposit for special permission business in accordance with the agreement of the contract; 4. Other rights agreed on in the contract. Article 10 Franchisors should implement following duties: 1. Publish information in time in accordance with related provisions of the said measures; 2. Authorize the rights of special permission business to franchisees and provide business symbol and business handbook that represent the system of special permission business; 3. Provide franchisees with guidance, training and other service for sale, business or technology that special permission business needs; 4. Provide franchisees with goods supply in accordance with the agreement of the contract. Except for special sold commodities or other goods that must be supplied by franchisors or the suppliers assigned by franchisors for the purposes of assuring the quality of special permission business, franchisors must not force franchisees to accept their goods supply, but they may stipulate the quality that the goods should meet, or provide some suppliers for franchisees’ choice; 5. Franchisors should be responsible for the quality of the goods provided by the suppliers assigned by them; 6. Sale promotion and advertising campaign agreed on in the contract; 7. Other duties agreed on in the contract. Article 11 Franchisees have following rights: 1. Obtain trademark, trade name, and business mode and other business resources authorized by franchisors; 2. Receive the training and guidance provided by franchisors; 3. Get the goods in time supplied or arranged by franchisors at the price agreed on in the contract; 4. Accept the support for promoting selling carried out uniformly by franchisors; 5. Other rights agreed on in the contract. Article 12 Franchisors should carry out following duties: 1. Do business in accordance with the agreement of the contract; 2. Pay business funds and cash deposit for special permission business; 3. Safeguard the unity of special permission business system, must not transfer the rights of special permission business without franchisors’ permission; 4. Provide franchisors with true business situation, financial conditions and other information agreed on in the contract in time, 5. Accept franchisors’ guidance and supervision; 6. Keep franchisors’ business secret; 7. Other duties agreed on in the contract. Chapter III The contract of special permission business Article 13 The content of the contract of special permission business is agreed on by persons concerned, normally including following content: 1. The name and address of the persons concerned; 2. Whether the content, term, place that are authorized to use the rights of special permission business are monopolized; 3. The varieties, sum of funds of special permission business, the mode of payment and the mode of collecting and returning cash deposit; 4. Regulations of keeping secret; 5. The products or service quality control and responsibilities of special permission business; 6. Training and guidance; 7. Use of trade names; 8. Use of trademark and intellectual property right; 9. Consumer complaints; 10. Propaganda and advertisement; 11. Revising and canceling the contract; 12. Responsibility for breaking a contract; 13. Regulations of settling the disagreement; 14. Other regulations agreed on by both sides. Article 14 The funds of special permission business means the funds paid by franchisees for obtaining the rights of special permission business, including following kinds: 1. Franchise funds: the funds paid only once by franchisees to franchisors for obtaining the rights of special permission business; 2. Funds of use: the funds paid by franchisees to franchisors according to a certain standard or rate regularly during the use of the rights of special permission business; 3. Funds agreed on for others: other funds that franchisees pay franchisors in accordance with the agreement of the contract for obtaining related goods supply or service provided by franchisors. Cash deposit means a certain funds collected by franchisors from franchisees for assuring franchisees to implement the contract of special permission business. It should be returned to franchisees when the contract expires. Both sides of special permission business should arrive at an agreement the funds and cash deposit of special permission business in accordance with the principles of fairness and reasonability. Article 15 The term of special permission business is normally no less than three years. When the contract expires, franchisors and franchisees may consult and decide the agreement of renewing a new contract of special permission business folloing the principles of fairness and reasonability. Article 16 After the expiration of the contract, former franchisees must not keep on using franchisors’ trademark, trade names or other symbols without the permission of franchisors, must not use franchisors’ trademark to apply for registering for similar kind of goods or service trademark, must not use the same registered trademark or similar words of franchisors to apply for registering the trade name in the enterprises’ names, must not use franchisors registered trademark, trade name or same decoration for shops or similar symbol to same or similar goods or service. Chapter VI Information publication Article 17 Franchisors and franchisees should publish related information in time before signing the contract of special permission business and while carrying out special permission business. Article 18 Franchisors should provide the applicants with true, correct basic information materials and contract text of special permission business in writing 20 days before the formal contract is signed. Article 19 The basic information materials published by franchisors should include following contents: 1. Name, address, registered capital, business range, number of years of being engaged in special permission business and other main cases of the frnachisors, and the content of financial report and basic conditions of tax payment audited by accounting firm; 2. Number, places, business situation and investment budget form for business network of franchisees. The rate of the franchisees who have cancel the contract in total franchisees; 3. Registration of trademark, use of the permission and complaints, trade name, operation pattern and other business resources; 4. Varieties, sum of the funds of special permission business, the way to collect the funds and the way to returning cash deposit; 5. All issues relating to complaints in recent five years; 6. All kinds of goods supply or service provided for franchisees and additional requirements and restrictions; 7. Ability certificate of providing franchisees with training and guidance, and actual conditions of providing training or guidance; 8. Basic conditions of legal representative or other competent persons in charge, whether they have been given criminal punishment, or have personal responsibility to the bankruptcy of the enterprises and so on; 9. Other information materials published by franchisors at the request of franchisees. If franchisees sustain economic losses because the information is not fully published or false information is provided, franchisors should undertake compensation responsibility. Article 20 Franchisees should provide the materials of their business ability at the request of franchisors according to the facts, including the certificates of main qualifications, credit, property right. They should also provide in time at the request of franchisors the materials agreed on in the contract, such as true business situation while doing special permission business. Article 21 During the term or after the contract expiration of special permission business, franchisees or their employees must not give away, use or allow others to use franchisors’ commercial secret they have mastered without franchisors’ permission. Article 22 The persons and applicants who do not sign a contract of special permission business with franchisors, but know franchisors’ commercial secret through the information publication of franchisors should commit the duty of keeping secret. Without the permission of franchisors they should not give away, tell others or transfer franchisors’ commercial secret. Chapter V Advertising campaign Article 23 When franchisors carry out propaganda, sales promotion, or selling the right of special permission business, the content of the advertisement should be correct, true, legal. It is not allowed to cheat, leave out important facts or have the statements that may mislead franchisees. Article 24 If the advertisement includes directly or indirectly the record, number or other related materials of franchisors’ income or profit, it should be true. The areas and time related to should be clear and definite. Article 25 Franchisors and franchisees must not imitate others’ trademarks, advertisement picture and word or other identified symbols by any ways that may mislead, cheat or cause confusion. Article 26 During popularizing activities of special permission business, franchisors must not overstate the interests of special permission business or cover up intentionally the situation that may affect others’ interests objectively. Chapter VI Supervision and management Article 27 Competent commercial authorities at all levels should enhance the management and coordination of the activities of special permission business in their administrative region, guide local industrial associations to develop their works. Competent commercial authorities at all levels should establish credit file for franchisors and franchisees, publish the name list of the enterprises that act contrary to the regulations in time. Article 28 The industrial association (commercial firm) of special permission business should formulate trade standard in accordance with the said measures, carry out trade self-discipline, provide the persons concerned to special permission business with related service, and promote the development of the trade. Article 29 Franchisors should report the contract of special permission business signed last year on every January to local commercial authorities of the region they and franchisees locate for the record. Local commercial authorities should report the record to the commercial authorities at higher level. Article 30 If special permission business relates to patent permission, patent permission contract should be signed in accordance with Patent Law of the People’s Republic of China and related provisions of the detailed implementation rules and record should be put on in accordance with Management Measures on Record of Permission Contract of Patent Implementation. Article 31 Before carrying out special permission business, franchisors should handle the record of the permission contract of using trademark in accordance with Trademark Law of the People’s Republic of China and the provisions of the detailed implementation rules. Chapter VII Special rules to foreign invested enterprises Article 32 Foreign invested enterprises must not be engaged in the business prohibited in Guidance Catalogue of Foreign Invested In Industries in the form of special permission business. Article 33 If foreign invested enterprises carry out commercial activities in the form of special permission business, they should make an application to original approval authority for adding business scope of “Being Engaged in Commercial Activities in the Form of Special Permission Business”, and submit following materials: 1. Application letter and resolution of board of directors; 2. Business license of the enterprises and approval certificate of foreign invested enterprises (copy); 3. Contract, the agreement of revising the regulations (foreign invested enterprises submit only the revision of the regulations; 4. Related documents and materials that prove they meet the provision of Article 7 of the said measures; 5. Basic information materials reflecting the provisions of Article 19 of the said measures; 6. Contract sample of special permission business; 7. Handbook of special permission business. The approval authorities should make a decision whether they approve it or not within 30 days at the receipt of above application materials. After the applicants receive the permission, they should go through the formalities of enterprises’ registration and revision in industrial and commercial administrations one month after obtaining Approval Certificate of Foreign Invested Enterprises issued by approval authorities. Article 34 If foreign invested enterprises are approved to be engaged in commercial activities in the form of special permission business, they should report the contract of special permission business signed last year on every January to original approval authorities and local commercial authorities where franchisees locate for the record. Article 35 When foreign investors establish foreign invested enterprises that are engaged in commercial activities specially for the mode of special permission business, they should meet related laws, regulations and rules of foreign merchant investment except according with the said measures. Article 36 The foreign invested enterprises engaged in commercial activities in the form of special permission business before the implementation of the said measures should put their business situation on record to original approval authorities. Any one who keeps on commercial activities in the form of special permission business should go through related formalities in accordance with the procedures stipulated in the said Chapter. Article 37 The enterprises invested by Hong Kong, Macau and Taiwan engaged in commercial activities in the form of special permission business are emplemented in accordance with the provisions of the said Chapter. Chapter VIII Legal responsibility Article 38 Whoever acts contrary to Article 7 and 8 of the said measures will be instructed competent administration of Ministry of Commerce to correct, and be imposed a fine of less than three thousand yuan. If the case is serious, business license is cancelled by industrial and commercial administrations. Article 40 Franchisors advertising contrary to the said measures will be handled in accordance with Advertisement Law of the People’s Republic of China and other related laws administrative regulations and rules. Chapter VIIII Supplementary articles Article 41 The interpretation of the said measures shall be vested in Ministry of Commerce. Article 42 The said measures come into effect as of February 1, 2005. Management Measures on Commercial Special Permission Business (trial) are abolished at the same time. (All information published in this website is authentic in Chinese. English is provided for reference only. ) |
 | Ministry of Commerce Decree 25, 2004 2005-01-12 13:49 |
All articles marked with "Article type: Original" posted on the website of the Ministry of Commerce and its sub-sites are copyrighted by this Website and its sub-sites. Any reproduction or use by any other websites, media or individuals must be attached with a clear indication of "Source: Ministry of Commerce Website".
All articles posted on this website or its sub-sites marked with "Article type: reproduced" or "Article type: translated" and "Article type: redistributed" come from other media, and are provided solely for the user's information, which does not mean this Website or its sub-sites endorse the ideas thereof or assume any legal liability or responsibility for their authenticity. Any other media, websites or individuals must maintain the source of information indication on this Website or its sub-sites when using the information, and shall assume legal liability for the use.
