Franchise law in Nepal
25 April 2023
This article outlines the legal procedure for the franchise of international brand (Foreign Trademark) in Nepal as per the prevailing laws.
1. FRANCHISE IN NEPAL
Franchising in Nepal under Section 3(f) of the Foreign Investment and Technology Transfer Act 2019, franchise falls under the category of “technology transfer,” which refers to any technology transfer agreement between an industry and a foreign investor on matters related to user licenses, technological know-how sharing, or the use of technological knowledge (franchise).
2. LAWS GOVERNING FOREIGN FRANCHISE
The following law regulate foreign franchising in Nepal:
- The Foreign Investment and Technology Transfer Act 2019 (“FITTA”),
- Patent, Design and Trademark Act, 1965 (“PDTA”),
- Foreign Investment and Technology Transfer Regulations, 2020 (“FITTR”).
3. PROCEDURE OF FRANCHISING OF INTERNATIONAL BRAND:
Under FITTA, the procedure of franchising of international brand can be outlined as follows:
Note:
- It will take around 12 to 14 months for trademark registration in Nepal.
- Without trademark registration of a foreign brand, one cannot get approval of a trademark franchise agreement from the DOI. Foreign brand do not get validity and protection unless such trademark is registered in Nepal.
4. FOREIGN FRANCHISE PERMITTED SECTOR
Unlike the foreign investment, FITTA has not restricted specific industries or businesses for franchise business.
5. INVESTMENT THROUGH TECHNOLOGY TRASNFER
FITTA under Section 2(j,8) has identified the scope of foreign investment through technology transfer.
FITTA Section 7 mentions:
Foreign investment can be made in any industry through technology transfer. Through technology transfer agreement between concerned industry and foreign investor.
The agreement has limitations:
- Agreement may not provide for repatriation of royalty in excess of prescribed ceiling.
- Agreement has to be approved by foreign investment approving body.
6. REQUIRED DOCUMENTS FOR FRANCHISING PROCESS
The required documents for franchise of foreign brand in Nepal are:
7. Royalty rates for technology transfer or franchise
FITTR under its Schedule 1 prescribes up to 5% of total local scales and 10% of total exports for reparation of royalty.
The specific royalty rates are as follows:
For all types of technology transfer for industry
For use of trademark only
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or its members. The firm shall not be liable for consequences arising out of actions undertaken by any person relying on the information provided herein.
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