Registration Procedure for Franchise Agreements in the Ukraine
For a long time franchisors found themselves between a rock and a hard place in the Ukraine. Even though the Ukrainian franchise law required the registration of franchise agreements, this was not
For a long time franchisors found themselves between a rock and a hard place in the Ukraine. Even though the Ukrainian franchise law required the registration of franchise agreements, this was not possible in practice because the law setting out the registration procedure and the management of the state registries had yet to be adopted. As a result the relevant state authorities refused the registration.
Since failure to register a franchise agreement means that the parties to the franchise agreement cannot rely on the provisions of the franchise agreement vis-à-vis third parties, this left franchisors in a difficult position.
To avoid problems, many foreign franchisors filed a request for registration with the relevant local state administration (which registered the franchisee) with a view of obtaining an official letter stating that due to the lack of procedural rules the franchise agreement could not be registered at the moment.
From 21 April 2015 onwards however, when Order No. 1601/5 on the "Procedure for the State Registration of Commercial Concession (and Sub-Concession) Agreements" will come into force, right holders (i.e. franchisors) and users (i.e. franchisees) will officially be able to register their franchise agreements for the first time. Pursuant to the Order, the Ukrainian State Registrar of Legal Entities and Individual Entrepreneurs ("State Registrar") will be in charge of the registration.
There are a few points to note:
Franchisors that have already been through the registration process with Rospatent in Russia will recognise some similarities in the approach to registration and based on our experience in the region registration could turn out to be a complicated and potentially frustrating process as the local authorities tend to take a very bureaucratic approach.
Interestingly, the new Government in the Ukraine recently submitted a draft law no. 1580 proposing substantial amendments to the current franchise legislation in the Ukraine, such as the abolishment of the registration requirement for franchise agreements. As this law has only been adopted in the first reading (three are required in total), it is likely that there will be further amendments during the course of the legislative procedure so we may not have heard the last word about registration yet.
In the meantime, however, it is strongly recommended that franchisors comply with the registration requirement or otherwise risk its unenforceability towards third parties.
Since failure to register a franchise agreement means that the parties to the franchise agreement cannot rely on the provisions of the franchise agreement vis-à-vis third parties, this left franchisors in a difficult position.
To avoid problems, many foreign franchisors filed a request for registration with the relevant local state administration (which registered the franchisee) with a view of obtaining an official letter stating that due to the lack of procedural rules the franchise agreement could not be registered at the moment.
From 21 April 2015 onwards however, when Order No. 1601/5 on the "Procedure for the State Registration of Commercial Concession (and Sub-Concession) Agreements" will come into force, right holders (i.e. franchisors) and users (i.e. franchisees) will officially be able to register their franchise agreements for the first time. Pursuant to the Order, the Ukrainian State Registrar of Legal Entities and Individual Entrepreneurs ("State Registrar") will be in charge of the registration.
There are a few points to note:
- an application to register can only be filed after the state registration of the franchisor and the franchisee. Where the franchisor is a foreign entity, it will need to prove its legal status to the State Registrar by submitting an apostilled or legalised extract from its local company register;
- proof of ownership of the licensed intellectual property rights will need to be provided, such as copies of trademark registration certificates;
- any documents in a foreign language will need to be translated into Ukrainian by a sworn translator and foreign documents must further be either apostilled or legalised;
- once registered certain information in respect of the franchise agreement will become publicly available over the Ministry of Justice's web porta but this public information will not include information on fees payable under the franchise agreement.
Franchisors that have already been through the registration process with Rospatent in Russia will recognise some similarities in the approach to registration and based on our experience in the region registration could turn out to be a complicated and potentially frustrating process as the local authorities tend to take a very bureaucratic approach.
Interestingly, the new Government in the Ukraine recently submitted a draft law no. 1580 proposing substantial amendments to the current franchise legislation in the Ukraine, such as the abolishment of the registration requirement for franchise agreements. As this law has only been adopted in the first reading (three are required in total), it is likely that there will be further amendments during the course of the legislative procedure so we may not have heard the last word about registration yet.
In the meantime, however, it is strongly recommended that franchisors comply with the registration requirement or otherwise risk its unenforceability towards third parties.