Haworth & Lexon Law Newsletter

??Corporate and Investment??

No.1, 2005 (Total:No.4)    Jan 10th, 2005

Edited by Haworth & Lexon

??Haworth & Lexon Law Newsletter?? (Corporate and Investment) is issued every month, mainly introducing the legal change in the fields of corporate, investment with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment.

Administration on Commercial Franchise was Promulgated

Foreign Invested Franchise Has Clear Legal Regulation

Commerce Ministry promulgated the Administration on Commercial Franchise on Dec 31 2004, and the Administration will become effective from Feb 1 2005. The Administration made great amendments to the Trial Administration on Commercial Franchise, and also fully regulates the requirements of franchisor and franchisee, the franchise contract, the information disclosure and etc.

The Administration stipulates that franchisor should at least have 2 direct sales shops above 1 year??s sales experience, and also stipulates that the franchise should be no less than 3 years. Otherwise, the rights and responsibilities of franchisor and franchisee, information disclosure have also been ruled in the Administration.

The Administration also sets out special chapter for the stipulation on foreign invested enterprises operating in franchise.

According to the Administration, Foreign Enterprise can invest in the encouraged and restricted items listed in the Catalogue for the Guidance of Foreign Investment Industries. That is, foreign investor can invest in commodities trade, direct selling, mail-order selling, internet selling, sales agent, commercial management; and foreign investor is allowed to be the holding party except there is special regulations. However, for the wholesale and retail scope in automobiles, newspapers, magazines, pharmaceutical products, pesticides, mulching films, chemical fertilizers processed oil, grain, vegetable oil, sugar, tobacco and etc., there still has restrain for foreign investment in these area.

Foreign invested enterprise doing franchise should be approved be the government.

Except special establishment procedure, the requirements of franchisor and franchisee, their rights and responsibilities, information disclosure are the same with domain enterprise, what represents China??s abidance to National Treaty Rule of WTO.

The Administration is only for the commerce area, however, up to the moment, there is no regulation stipulating that if the foreign invested enterprises can dealing franchise in restaurants, logistics service.

Haworth & Lexon Law Office has rich experience in the fields of corporate and investment. If you have any queries on the above legal matters, we are happy to provide you with our advice. Please contact Mr. Chambers Yang, the Attorney and Partner of the firm at:

Tel: 8621-6887 9696  Fax: 8621-6887 8766   Email: chambers@hllawyers.com