franchiser to which it has accessed to anyone else or allow anyone else to use it.

Article 19 A franchiser shall, in the first quarter every year, report to the commerce department the information in respect of the subscription of franchise contracts for the previous year.

Chapter III Information Disclosure

Article 20 A franchiser shall set up and carry out a perfect information disclosure system in accordance with the provisions as prescribed by the commerce department of the State Council.

Article 21 A franchiser shall provide the franchisee with the information as prescribed in Article 22 of the present Regulations and the text of the franchise contract in written form at least 20 days before the subscription of a franchise contract.

Article 22 A franchiser shall provide the franchisee with the information as follows:

(1) The name, domicile, legal representative, registered capital, business scope of the franchiser and basic information in respect of the franchise operations;

(2) The basic information in respect of the registered trademark, company logo, patent, know-how and business model of the franchiser;

(3) Type, amount and payment method of franchise fees (including whether guaranty is to be collected as well as the conditions and methods for refunding guaranty);

(4) Prices and conditions for providing the franchisee with products, services and equipments;

(5) Specific contents of business guidance, technical support, business training and other services to be continuously provided to the franchisee as well as the providing methods and implementation plans;

(6) Concrete measures for guiding and supervising the business activities of the franchisee;

(7) The investment budget for the franchise outlet;

(8) The quantity, distribution and business evaluation of franchisees currently existing within the territory of China;

(9) Abstracts of the financial statements and audit reports for the recent two years as audited by the accountant firm;

(10) The situation in respect of franchise-related lawsuits and arbitration for the recent five years;

(11) Whether the franchiser or its legal representative has any record of major illegal business operations; and

(12) Other information as prescribed by the commerce department under the State Council.

Article 23 A franchiser shall provide its franchisees with authentic, accurate and complete information, and may not conceal any related information or provide false information.

Where any significant change has occurred to the information provided by a franchiser to any of its franchisees, the franchiser shall timely notify it to the franchisee.

If a franchiser conceals any related information or provides false information, the franchisee may cancel the franchise contract.

Chapter IV Legal Liabilities

Article 24 Where a franchiser does not satisfy the requirements as prescribed in Paragraph 2 of Article 7 of the present Regulations but engages in the franchise activities, the commerce department shall order it to make corrections, confiscate its illegal proceeds, impose a fine of more than 100,000 yuan but less than 500,000 yuan thereon, and make an announcement in respect of it.

Where an entity or individual, which does not possess an enterprise status, engages in franchise activities as a franchiser, the commerce department shall order it/him to cease the illegal business operations, confiscate its/his illegal proceeds, and impose a fine of more than 100,000 yuan but less than 500,000 yuan thereon.

Article 25 Where a franchiser fails to put itself on the archives of the commerce department in accordance with Article 8 of the present Regulations, the commerce department shall order it to do so within a fixed period, and impose a fine of more than 10,000 yuan but less than 50,000 yuan thereon; and in case it fails to do so within the fixed period, it shall be fined more than 50,000 yuan but less than 100,000 yuan, and an announcement shall also be delivered.

Article 26 Where a franchiser violates Article 16 or 19 in the present Regulations, the commerce department shall order it to make corrections, and may impose a fine of less than 10, 000 yuan; in the case of serious circumstances , it shall be fined more than 10,000 yuan but less than 50,000 yuan, and an announcement shall also be delivered.

Article 27 Where a franchiser violates Paragraph 2 of Article 17 in the present Regulations, the commerce department shall order it to make corrections, and impose a fine of more than 30,000 yuan but less than 100,000 yuan thereon; in the case of serious circumstances, it shall be fined more than 100,000 yuan but less than 300,000 yuan, and an announcement shall also be delivered; and if a crime is committed, it shall be subject to criminal liabilities.

Where a franchiser conducts frauds or misleading by making use of advertisements, it shall be punished in accordance with the related provisions in the Advertising Law.

Article 28 Where a franchiser violates Article 21 or 23 of the present Regulations, and a franchisee report it to the commerce department and, upon verification, the report is found to be true, the commerce department shall order the franchiser to make corrections and impose a fine of more than 10,000 yuan but less than 50,000 yuan thereon; and in the case of serious circumstances, it shall be fined more than 50,000 yuan but less than 100,000 yuan, and an announcement shall also be delivered.

Article 29 Where any entity or individual cheats the property of someone else in the name of franchise and commits a crime, it/he shall be subject to criminal liabilities; and in case no crime is committed, it/he shall be punished by the pubic security organ in accordance with the Law of the People's Republic of China on Public Security Administrative Punishments.

Where any entity or individual engages in pyramid selling in the name of franchise, it/he shall be punished in accordance with the Regulations on Prohibiting Pyramid Selling.

Article 30 Where any functionary of the commerce department abuses his power, neglects his duties or resorts to cheats so that a crime is committed, he shall be subject to criminal liabilities; and if no crime is committed, he shall be punished in accordance with law.

Chapter V Supplementary Rules

Article 31 The license of trademarks and patents in relation to the franchise operations shall be handled in accordance with the laws and administrative regulations on trademarks and patents.

Article 32 Related associations and organizations shall, under the guidance of the commerce department of the State Council, set down the provisions on franchises in accordance with the present Regulations, intensify self discipline, and provide related services to the parties involved in the franchise.

Article 33 Any franchiser having engaged in franchise activities before the implementation of the present Regulations shall be put on the archives of the commerce department in accordance with the present Regulations; and where it fails to do so within the time limit, it shall be punished in accordance with Article 25 of the present Regulations.

The franchiser prescribed in the preceding paragraph does not apply to the provisions in Paragraph 2 of Article 7 of the present Regulations.

Article 34 The present Regulations shall go into effect as of May 1, 2007.

(Not the official translation. Source: www.fdi.gov.cn)