When you have decided to grow your business in India into a franchise, you would need to consider preparing the most crucial document – The Franchise Agreement. But what do you do after preparing this document? Does it need registration? Well. Here’s what you need to know about registration of franchise agreement in India.
Registration of The Franchise Agreement – Here’s What You Should Know
Technically, the word “franchise” refers to a contract between two parties, but most people use it to talk about the business itself. Furthermore, there is no one law that covers franchise agreements, but there are many regulations that do.
Even though franchise agreements do not have to be registered centrally, it’s best for both the franchisor and the partner to have a legally sound and well-written agreement.
It’s also a good idea to make sure the agreement follows the laws and rules that are already in place in India, especially those about intellectual property rights, consumer safety, competition law, and contract law.
Some of these franchise laws include:
- Indian Contracts Act, 1872
- Consumer Protection Act, 1986
- Trademark Act, 1999
- Copyright Act, 1957
How Registration of a Franchise Agreement in India Works?
In India, there is no one place where franchise agreements can be registered. But by taking these general steps, you can still make sure that your franchise agreement is valid and enforceable.
Let’s start on the process of registration of a franchise agreement in India.
1. Preparing a Comprehensive Agreement
Work with lawyers to make a thorough and clear franchise agreement that covers all parts of the franchise relationship, such as terms, fees, intellectual property rights, training, support, dispute settlement, termination clauses, and more.
2. Compliance with the Indian Laws
Make sure that your franchise agreement follows Indian laws and rules, such as those about intellectual property, consumer safety, competition law, and contract law.
3. Stamp Duty & Notarization
Depending on the state, you may need to sign your franchise agreement on stamp paper with the right value and have it notarized. Different states have different stamp duty rules, so it’s important to find out what the rules are in the state where the deal is in closure.
4. Registering under the Indian Contract Act, of 1872
The Indian Contract Act of 1872 says that you don’t have to register franchise deals, but you can if you want to. Registration gives the agreement more credibility and makes it easier to prove if there is a disagreement.
5. Consult a Legal Expert
It is advisable to talk to lawyers who focus on contract and business law. They can help you figure out what you need to do based on the details of your franchise agreement and the state rules that apply to you.
Benefits of Registration of Franchise Agreement in India
There are a number of possible advantages to voluntarily registering franchise agreements in India, despite the fact that doing so is not necessary.
A few of them are as below.
- Registration makes an official record of the franchise agreement’s presence and the terms of the agreement. This can be helpful if the franchisor and other entities get into a fight or argue about something.
- Registration guarantees the authenticity and legality of a document. In the event of a legal disagreement, the agreement is in use to support either party’s position.
- Registered Documents are easy to access by anyone. Therefore third parties can also look at the terms of the franchise agreement. This kind of openness can help the franchisor and the franchise system keep their reputation.
- A franchise agreement that has been registered might be easier to enforce in court than one that has not been registered. During a court case, registered papers are often given more weight.
- If your franchise agreement includes intellectual property rights, such as trademarks or copyrights, registration can help protect and establish ownership of these rights.
- Registration can make the company look more trustworthy in the eyes of people who want to buy a franchise. People might think that a signed deal is more professional and reliable.
- There may be legislative registration requirements for some agreements, such as those involving the transfer of intellectual property or the formation of charges. Having the agreement registered guarantees that all necessary conditions have been met.
- Disputes and misunderstandings between parties can be avoided with the use of registered, well-written agreements. Having everything written down and filed makes it less likely that disagreements will happen over unclear terms.
Remember that the benefits of registering a franchise agreement depend on the person, the nature of the agreement, and any changes to the law that have happened since I last updated this post. Always talk to lawyers who know the current laws and rules in India so that you can make an informed decision about your franchise agreement.
To sum up,
A well-written franchise agreement is key to avoiding disagreements between the franchisor and partner about the use of the franchisor’s business and Intellectual Property Rights (IPR) or any other terms and conditions of their agreement.
In the case of a franchise, the franchisee must handle the network with at least two people, one of whom must be the franchisee or another partner, shareholder, or designated representative, and work constantly on developing, managing, and running the business.
This means setting aside enough time and money to make sure all responsibilities to the franchisor, its clients, and other people are in adherence.
Sparkleminds can help you write all kinds of legal deals from the comfort of your own home. With a simple signup, you can talk to our best experts for free about a franchise agreement.
Frequently Asked Questions
Any kind of agreement in India has a stamp tax of at least Rs 500. But for a Franchise Agreement, the stamp duty is according to the Bombay Stamp Act. This is by considering the royalty and/or fees and/or amount and/or transaction amount that both parties agree on.
For a franchise agreement to be legal in India, important facts are necessary. Also terms will be clear, and intellectual property laws will follow.
The right to use the franchisor’s trademark is one of the most important parts of a business agreement. The brand must be registered, and the franchisor must be the only one who can use it. In the contract, the franchisor must say what word or sign is registered or applied for as a trademark.
The person who gives the guarantee is often the “Individual” or the “Principal” in the franchise deal. Most personal guarantees are endless unless a clause that limits or caps liability or an exclusion clause says otherwise.
The short answer is a business deal is complex and full of details. Most franchise agreements are around 40 pages long, but some are well over 100 pages long!
