Article 13 of the Saudi Franchise Law
المادة 13 من نظام الامتياز التجاري · الفصل السابع: التنازل عن اتفاقية الامتياز
The franchisee must obtain the franchisor's approval before assigning the franchise or changing its controller, and the franchisor may not object or withdraw approval except in specified cases.
Official text (Arabic)
This article has not been amended since the law was issued.
ما لم تنص اتفاقية الامتياز على غير ذلك، يجب, قبل تغيير الشخص الذي يسيطر على صاحب الامتياز أو التنازل عن اتفاقية وأعمال الامتياز إلى الغير، أن يحصل صاحب الامتياز على موافقة مانح الامتياز, ولا يجوز لمانح الامتياز الاعتراض على تغير الشخص الذي يسيطر على صاحب الامتياز أو الاعتراض على تنازل صاحب الامتياز عن اتفاقية الامتياز وأعمال الامتياز إلى الغير أو أن يسحب موافقته بعد منحها؛ إلا في الحالات الآتية:
1- إذا كان من غير المرجح امتلاك المتنازل له موارد مالية كافية تمكنه من تنفيذ الالتزامات المترتبة على صاحب الامتياز بموجب اتفاقية الامتياز.
2- إذا كان المتنازل له غير قادر على استيفاء متطلبات مانح الامتياز المعقولة في شأن التنازل عن اتفاقية وأعمال الامتياز.
3- إذا كان المتنازَل له غير مستوفٍ للمعايير المعتمدة من مانح الامتياز لاختيار أصحاب الامتيازات.
4- إذا لم يوافق المتنازَل له -كتابة- على تحمل التزامات صاحب الامتياز بموجب اتفاقية الامتياز من تاريخ التنازل عنها.
5- إذا لم يسدد صاحب الامتياز أي مقابل مستحق عليه لمانح الامتياز.
6- أي حالة أخرى تحددها اللائحة.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 13 explained in plain English
This article regulates selling or transferring the franchise to another person, and also a change in the person controlling the franchisee (such as the sale of a majority of the shares of his company). Its provisions apply unless the franchise agreement provides otherwise.
The rule: Before assigning the franchise agreement and business to a third party, or changing the person controlling him, the franchisee must obtain the franchisor's approval.
The protection: The franchisor may not object to the assignment or the change of controller, or withdraw his approval after giving it, except in the following cases:
- If the assignee is unlikely to have sufficient financial resources to perform the franchisee's obligations.
- If he is unable to meet the franchisor's reasonable requirements for the assignment.
- If he does not meet the criteria the franchisor has approved for selecting franchisees.
- If the assignee does not agree in writing to assume the franchisee's obligations from the date of the assignment.
- If the franchisee has not paid any consideration due from him to the franchisor.
- Any other case the Implementing Regulations specify.
The meaning of "control" is set in Article 1, such as owning more than half of the capital or voting rights. Article 14 completes this provision, since it treats the franchisor as having consented by operation of law if he does not respond in writing to the franchisee's written request, as the Implementing Regulations specify. Anyone facing a refusal he considers unjustified can consult a lawyer who specializes in commercial cases.
Practical example
Abdullah wants to sell his restaurant franchise in Taif to another investor. He asked for the franchisor's approval, and the franchisor refused without a reason. Unless the agreement provides otherwise, the franchisor may object only in the specified cases, such as the buyer's financial resources being insufficient, his not agreeing in writing to assume the obligations, or unpaid sums being due.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 13 of the Saudi Franchise Law
Do I need the franchisor's approval to sell a franchise?
Yes. Unless the agreement provides otherwise, the franchisor's approval must be obtained before assigning the franchise agreement and business to a third party or changing the person controlling the franchisee.
Can the franchisor refuse a sale without a reason?
He may object only in the cases the article specifies, such as the assignee's insufficient resources, his not meeting the criteria, unpaid sums due to the franchisor, or a case the Implementing Regulations specify.
Can the franchisor withdraw his approval after giving it?
He may not withdraw it after giving it except in the same cases set out in the article.
More articles on Assigning the Franchise Agreement
- Article 14
The franchisor is treated as having consented to an assignment of the franchise or a change of controller if he does not respond in writing to the franchisee's written request, as the Implementing Regulations specify.
مع مراعاة أحكام المادة (الثالثة عشرة) من النظام, يعد مانح الامتياز موافقاً حكماً على تنازل صاحب الامتياز عن اتفاقية الامتياز وأعمال الامتياز إلى الغير أو تغير ا
- Article 22
The agreement to use any trademark or trade name connected with the franchise ends when the franchise is assigned, terminated, ends or is not renewed.
يترتب على التنازل عن اتفاقية الامتياز وأعمال الامتياز أو إنهائها أو انقضائها أو عدم تجديدها؛ انقضاء اتفاقية استخدام أي علامة تجارية أو اسم تجاري مرتبط بأعمال ال
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.