www.peterkapartners.com

PRAGUE

BRATISLAVA

KYIV

SOFIA

MOSCOW

BUCHAREST

WARSAW

MINSK

BUDAPEST

www.peterkapartners.com

The CEE Law Firm

www.peterkapartners.com

Legal aspects of franchising

Zikratski Dmitri

Managing Associate

Peterka and Partners

Emergence history

1999

Article 910. The Contract of complex business license

... 2. Relations of franchising

are regulated by the legislation. The franchise

agreement may be concluded only in the cases expressly provided by the

law.

2004

12 articles in the Civil Code

Legal regulation

• Resolution of the Council of Ministers of the Republic of Belarus from 21.03.2009 N 346“About the registration of the license agreements, agreements of the assignment of rights to objects of industrial property law, agreements of the pledge of property rights, attested by the certificate of the trademark registration, service mark, and the agreements of the complex business license (franchising)”

• Resolution of the State Committee for science and technologies of the Republic of Belarus from 15.04.2009 N 6 “About the approval of the Instruction on the procedure for the registration of the license agreements, agreements of the assignment of rights to objects of industrial property law, agreements of the pledge of property rights, attested by the certificate of the trademark registration, service mark, and the agreements of the complex business license (franchising)”

• Resolution of the Council of Ministers of the Republic of Belarus from 17.02.2012 N 156 “About the approval of the unified list of the administrative procedures undertaken by the state bodies and other organizations in relation to the legal entities and individual sole traders, amending to resolution of the Council of Ministers of the Republic of Belarus from February 14, 2009 N 193 and cancellation of certain resolutions of the Council of Ministers of the Republic of Belarus”

• Tax Code of the Republic of Belarus

Structure of the license complex

Trade name

Know-howObjects of intellectual

property

???

Franchising agreement

•Commercial organizations

•Individual entrepreneurs

• Fixed (flat payment)

• Periodic (royalty)

• % from the revenues

• other

• with indicating of the territory

• without indicating of the territory

• defined in the contract

• open-end contract

TermTerritory of

using

SidesRemunerati

on

Form of agreement

Written form

Failure to follow simple written form of the agreement deprive the parties of the right in the event of a dispute to refer to the confirmation of the deal

and its conditions on the testimony, but does not

deprive them of their right to give written and other

evidence not the testimony

Obligatory registration

Failure to comply with the requirements of the state

registration of the deal shall entail its invalidity. Such deal is

considered to be void.

Evasion from the registration -the registration by the court

decision

Registration. State body, term, fee

• franchising agreements

• its amendments

• termination of these agreementsWhat

• State institution “National center of intellectual property"Where

• 1 month from the date of the application filingTerm

• 100 $ registration

• 50 $ amendmentCost

Registration. Documents

Concluding of agreement

Application

Agreement

Power of attorney

State fee

Amendments to agreement

Application

Additional agreement

Power of attorney

State fee

Termination of agreement

Application

Termination agreement

Power of attorney

Amendments to agreement

• By the general rules

• In the relation with the third parties – after registration

• Saving in force after the parties changing

• Amendments of the trade nameAgreement is continuing

Agreement is terminated by the request of the franchisee (+ compensation of losses)

Proportion decrease of the remuneration

• Termination of one of the rightsAgreement is valid (except of specified rights)

Franchisee entitled to demand of decreasing of the remuneration (AGREEMENT CAN PROVIDE OTHERWISE)

Termination of agreement

• Termination under the general rules

• Without specifying of the term – any party can refuse by notifying the other party in 6 months (or more, if it is provided by the agreement)

• Registration

Agreement without specifying of the term

Agreement is terminated before the expiration of the term

• No registration

Agreement ceased its validity in connection with the term expiration of the agreement

Protection from the early termination of the agreement

Sublicense agreement

• The same rules are applied as for franchising

• Term is not longer than the term of the main agreement

• Termination of the main agreement = termination of the sublicense agreement

• Franchisee is liable for the action of the secondary franchisees (another can be provided by the law)

Franchisor's obligations

• transferring of the technical and commercial documentation;

• transferring of the additional information about business complex;

• franchisee training;

• issuing of the license (if necessary);

• providing of the consulting and marketing services(permanent technical and advisory assistance);

• control of the goods quality (works, services), produced (performed, provided) by the franchisee;

• delivering of goods (raw, materials);

• competition restriction.

Franchisee’s obligations

• payment of remuneration to the franchisor;

• compliance by the franchisee of requirements established by the franchisor for using of the business complex;

• compliance of the schedule development;

• confidentiality;

• restriction of competition and the possible limitation of using of the assigned rights;

• notification of the purchasers (customers) by the most obvious way that the franchisee uses a brand name, trademark, service mark or other means of individualization of civil turnover participants, goods, works, services on the basis of a franchising agreement.

Content of the agreement.Practical aspects

• Audit (remuneration depends on revenue)

• Coordination of costs (remuneration depends on profit)

• Amendments to the license complex (obligation to follow the amended instructions + remuneration)

• Protection of know-how (access, training, clauses in the agreements with employees)

• Protection of business reputation of the Franchisor

• Liability (avoiding of the penalty reduction)

• Dispute resolution (courts, complaints procedure)

Developing of a property complex

• Existence of rights on objects of intellectual property subjecting to registration in the country of the franchisee

• Existence of the copyrights on the objects of intellectual property Acquired rights (interior design, advertising products)

Employee’s works

• Compliance of the licensing complex to the legislation of the Republic of Belarus

• Legislation on advertising (Russian, Belarusian languages, special requirements to advertising) Requirements to quality of the goods

Limitation of rights

Franchisor

don't provide to other persons

similar licensing complexes for

its using on the territory

covered by the franchisee or to

refrain from own similar

activities on this territory

Franchisee

don't compete with the franchisor on the territory covered by the franchising agreement in respect of business activity, carried on by the franchisee with using owned to the franchisor exclusive

rights and undisclosed information

refusing from receiving of the similar exclusive rights and undisclosed information under the franchising agreement from

the competitors (potential competitors) of the franchisor

coordinate with the franchisor location of the premises used for the execution of the franchising agreement, as well as its external

and internal design

Liability of the Franchisor for the requirements to the Franchisee

Subsidiary liability

under the claims to the franchisee about the

discrepancy of quality of the goods (works, services) sold

(performed, rendered) by the franchisee under the franchising agreement in comparative with the quality of the similar goods

(works, services) sold (performed, rendered) directly

by the franchisor

Solidary liability

Under the claims to the franchisee as a manufacturer of

products (goods) of the franchisor

Income tax of non-residents (Franchisor)

• Article 146 of the Tax Code (clause 1.3.) – royalty

• Rate - 15 %

• Tax period – month

• Tax is calculated, withheld and transferred to the budget by the Franchisee from the amount of income

100-15=85

100/0,85=117,65

• Declaration should filed not later than the 20th of the following month

• Payment should be made not later than the 22nd of the following month

Avoidance of the double taxation

• Netherlands, Germany3 %

• Austria, Belgium, Hungary, Spain, Cyprus, UAE, Slovenia, the Czech Republic and others.5 %

• Italy6 %

• Bulgaria, China, Latvia, Lithuania, Russia, Slovakia, Switzerland, Estonia and others.10 %

PRAGUE . BRATISLAVA . KYIV . SOFIA . MOSCOW . BUCHAREST . WARSAW . MINSK . BUDAPEST l www.peterkapartners.com

The CEE Law Firm

Thank you for your attention!

Corporate and

Commercial

Investment and

Privatisation

Employment

IP law

Banking and Finance

Real estate and

construction

Telecommunications

Energy

Litigation

Public procurement

Peterka and Partners LLC

Pobediteley ave., 103, 13th floor, office 1303, Minsk, Belarusphone + 375 17 236 24 11

Dmitri Zikratski

Managing Associate

zikratski@peterkapartners.by

phone + 375 29 658 74 78

Skype: zikratski_dzmitry

PETERKA & PARTNERS is a leading independent full-service business law practice with a special commitment to Central

and Eastern Europe.

Since its establishment in 2000 the firm has proudly advised many local and international industrial and commercial

companies and financial institutions on their legal and business issues in the Region and has become recognised for its

expertise in several practice areas and deep industry insight.

A pioneer among Central and Eastern European law firms in expanding abroad, the firm pools its own entrepreneurial

experience and authentic business know-how to offer special added value to clients looking to set up and expand in the

Region or to develop their operations in several countries.

Having a direct presence in key locations in the region, namely the Czech Republic, Slovakia, Poland, Ukraine, Russia,

Bulgaria, Romania and Belarus, and covering also Hungary, Serbia, the firm provides clients from different industry sectors

with an integrated regional service and a single point of contact, maintaining a broad vision for all their regional assignments.

Practices

Capital Markets, Banking and Finance

Corporate/M&A

Criminal law

EU Law and Competition

Family law

Insolvency and Restructuring

Intellectual Property and New Technologies

Labour Law

Litigation and Arbitration

Public Procurement, PPP and EU Funds

Real Estate, Construction and Development

Tax and Tax disputes

French desk

Industries

Automotive

Banking, Finance and Financial services

Chemicals and Pharmaceutical Services

Construction and Real Estate Development

Consumer Products, Retail and Wholesale

Energy, Utilities and Infrastructure Projects

Food and Agriculture

Industrial Products

Information Technology

Sport, Media and Entertainment

Transportation and Logistics

Integrated services in the CEE region

Coordination of Legal Services

Corporate Restructuring

Debt Recovery

Compliance

PETERKA & PARTNERS │ PRAGUE BRATISLAVA KYIV SOFIA MOSCOW BUCHAREST WARSAW MINSK BYDAPEST

PRAGUEKarlovo namesti 671/24, 110 00 Prague 1T.: +420 246 085 300

BRATISLAVAKapitulska 18/ASK – 811 01 Bratislava T.: +421 2 544 18 700

SOFIA96, Georgi S. RakovskiBG – 1000 SofiaT.: +359 2 984 11 70

BUCHAREST41 Aviatorilor Blvd1st DistrictRO – 011853 BucharestT.: +40 21 310 48 82

KYIVBusiness Center "Renaissance"Vorovskoho 24 UA - 01054 KyivT.: +380 44 581 11 20

MOSCOWArmyansky pereulok 1/8 – 3RU – 101000 MoscowT.: +7 495 311 46 36

WARSAWŚniadeckich 10PL - 00-656 WarsawT.: +48 22 696 72 01

MINSKPobeditely ave., 103-1303BY – 220020 MinskT.: +375 29 591 35 85

BUDAPESTApáczai Csere János utca. 111051 BudapestTel.: +36 1 235 1090

GLOBAL CONTACTOndrej Peterka, managing partner

www.peterkapartners.com

The CEE Law Firm