Regulatory Overview of Franchising in Bangladesh
Core Statutory Pillars
| Regulatory Area | Primary Statute | Key Compliance Requirement |
|---|---|---|
| Contractual Validity | Contract Act 1872 | Section 10: Lawful consideration and object; Section 27: Restraint of trade limitations. |
| IP Licensing | Trademarks Act 2009 | Section 54: Registration of 'Registered User' agreements to protect brand equity. |
| Remittance of Royalty | Foreign Exchange Regulation Act 1947 | Section 18: Bangladesh Bank approval for outward remittance of royalty/technical fees. |
| Taxation | Income Tax Act 2023 | Section 56: Mandatory Withholding Tax (WHT) on royalty payments to non-residents. |
The Franchise Setup Roadmap
Key Drafting Considerations
- Territorial Exclusivity: Clearly define the scope under Section 27 of the Contract Act 1872 to ensure non-compete clauses are reasonable and not in absolute restraint of trade.
- Royalty Remittance: Under the Guidelines for Foreign Exchange Transactions (Vol-1), royalty payments exceeding 6% of the previous year's sales require prior BIDA and Bangladesh Bank clearance.
- Dispute Resolution: Inclusion of arbitration clauses governed by the Arbitration Act 2001 is standard for cross-border franchise models to ensure international enforceability.
Consult Barrister Liton Asaduzzaman Sarkar
For bespoke franchise drafting and BIDA regulatory clearance, contact our commercial wing.
Schedule Scoping SessionFrequently Asked Questions
Is a franchise agreement enforceable if not registered with the DPDT?
While the contract remains valid under the Contract Act 1872, Section 54 of the Trademarks Act 2009 stipulates that a licensee (franchisee) should be registered as a 'Registered User' to ensure the use of the mark by the franchisee accrues to the benefit of the franchisor.
What is the maximum royalty allowed for outward remittance?
Per the Foreign Exchange Regulation Act 1947 and BIDA circulars, royalties up to 6% of the previous year's turnover of the franchise unit can be remitted with BIDA registration; amounts exceeding this threshold require specific Bangladesh Bank approval.
Are non-compete clauses legal in Bangladesh franchise agreements?
Under Section 27 of the Contract Act 1872, any agreement in restraint of trade is void. However, reasonable restrictions during the term of the franchise are generally enforceable; post-termination restrictions are highly scrutinized and often unenforceable unless they protect specific trade secrets.
◆ Related Statutory Guides & Practice Insights
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<a href="/en/tax-deducted-at-source-tds-in-bangladesh-complete-withholding-tax-rates-challan-penalties/" style="color:#C5A059; font-weight:600; text-decoration:none; font-size:14px; display:inline-block; transition:color 0.2s;">• Tax Deducted at Source (TDS) in Bangladesh: Complete Withholding Tax Rates, Challan & Penalties</a>
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