Franchise Law in Nepal

This article explains detail procedure about the franchise of foreign brand in Nepal. Nepalese Company desiring to franchise the foreign brand should take approval from Department of Industry before the operation of the franchise business. Detail is explained in below paragraph.

1.Governing law of franchise in Nepal

There is no specific law regarding foreign franchise in Nepal. However, the Foreign Investment and Technology Transfer Act, 2019(2075) (“FITTA”) has provided term “technology transfer” and franchise falls under the category.

FITTA has defined technology transfer as any transfer of technology to be made under an agreement between an industry and a foreign investor on the matter of:

Patent, design, trademark, goodwill, technological specificity, formula, process,
User’s license, technological know-how sharing or use of technological knowledge (franchise)
Foreign technical adviser, management and marketing service or other technological skill or knowledge.

Besides FITTA, other governing laws for the foreign franchise in Nepal are:

Patent Design and Trademark Act, 2022 (1965) (“PDTA”)
Foreign Investment and Technology Transfer Regulations 2022 (2077)

2.Pre-conditions for the approval of franchise of foreign brand

The trademark registration of the foreign brand is the pre-conditions for the approval of franchise of foreign brand in Nepal. The detail regarding the registration of trademark is as mentioned.

2.1 Process of Registration of trademark in Nepal

Without registration of trademark under Department of Industry, no one shall do franchise agreement. The process for the registration of trademark in Nepal is as follow:

2.2 Time required for trademark registration in Nepal

The interval of time for the registration of trademark in Nepal is 6 to 8 months, if no opposition file petition against the applied trademark.

2.3 Registration of Trademark based on priority

Section 21C of the PDTA provides that the DOI can register a foreign trademark in Nepal without conducting examination. The home registration certificate is considered a major basis for registration of foreign trademark in Nepal. Further the PDTA also allows the trademark to be registered based on priority claim as recognized by the Paris Convention. The priority claim period is of 6 months.

2.4 Renewal and validity of trademark in Nepal

A trademark once registered is valid for 7(seven)years from the date of registration. Trademark can be renewed for any number of times for a period of 7(seven) years at a time.

Trademark should be renewed within the period of 35(Thirty-Five) days from the date of expiry of the validity of the trademark. The PDTA also provides right to the trademark holder to renew the trademark by making payment of penalty of NPR. 1,000(One Thousand Rupees only) within 6(Six)months from the expiry of the validity period.

3.Procedure for franchising foreign brand in Nepal

FITTA has provided the procedures for the franchising of foreign brand in Nepal. The procedures are as follows:

1^st step- Registration of foreign Trademark before Department of Industry.

2^nd Step- Execution of franchise agreement

3^rd Step- Approval of Franchise Agreement from the Department of Industry.

4.Required documents for franchising foreign brand

The documents that require for the franchising foreign brand in Nepal are:

a	An original copy of application of licensing of foreign brand
b	A notary certified copies of Foreign Registration Certificate of Licensor or Passport of Foreign partner including Memorandum of Association (MOA) and Articles of Association (AOA) of the foreign company.
c	Two(2) copies of the Franchise Agreement or other related agreement (if any exist).
d	A copy of the certificate of incorporation including MOA and AOA of local company.
e	Company profile or Bio-data of foreign investor.
f	Industry registration certificate of a local company along with authorized representative in Nepal.
g	A copy of minute of boards of local company and foreign company.
h	A notary certified copy of Current Audit Report and Tax Clearance Certificate.
i	A notary certified copy of power of attorney.

5.Royalty rate for technology transfer

The royalty rate for other technology transfer agreement :-

Royalty	Local Sales	Export Sales
Total amount or total sales amount.	Up to 5% of total sales excluding VAT.	Up to 10% of total sales excluding VAT.
If Royalty is based on Net Profits	Up to 15% of Net profits	Up to 20% of Net Profits

Royalty rate trademark franchise agreement:

Local Sales	Export Sales
Up to 2% of total sales excluding VAT for alcoholic and tobacco industry	Up to 5% of total sales excluding VAT for alcohol and tobacco industry
Up to 3% of total sales excluding VAT for other industries	Up to 6% of total sales excluding VAT for other industries

Disclaimer: All contains available here are for general information purposes. A proper legal solution always depends on your particular circumstances thus seeking advice from an attorney who can provide assurances of the information contained herein and interpretation of it. You are requested to seek legal advice for specific factual situations. If you need further information on this matter, please contact us at Legal Access Nepal Pvt. Ltd.

Advocate: Yogesh Bhandari, Sushma Dahal and Pushpa Basyal

Contact no. 9851249077/ 9851346722

UN Park, Kathmandu