On September 10, 2014, the Government of British Columbia announced that it is seeking public consultation in respect of its proposed franchising legislation.
The proposed legislation is based on the Uniform Franchises Act developed by the Uniform Franchise Law Conference of Canada, and the recommendations of the British Columbia Law Institute (“BCLI”) in its “Report on a Franchise Act for British Columbia”, which includes draft legislation.
The full Report can be found here: < http://www.bcli.org/project/franchise-act-project >.
Key recommendations from the Report include the following:
- Wrap-around disclosure documents are permissible if supplemented with additional information required to comply with British Columbia’s legislation and regulations;
- A disclosure document is valid if it is in substantial compliance with the disclosure requirements of the legislation and regulations. Minor defects not affecting a franchisee’s investment decision will not render a disclosure document non-compliant;
- Franchisors can accept a fully refundable deposit from a prospective franchisee prior to the franchisor providing disclosure so long as the deposit does not exceed an amount prescribed by regulation, is refundable without deductions and does not obligate the franchisee to enter into any franchise agreement;
- Disclosure documents can be delivered electronically or in a machine-readable format;
- The prohibition against a waiver or release of rights under the legislation does not apply to a post-dispute settlement agreement;
- A franchisee is not precluded from claiming damages in addition to a statutory right of rescission so long as there is no double recovery; and
- Similar to Ontario, Alberta and Manitoba, a franchisor will be exempt from having to disclose its financial statements to prospective franchisees if its minimum net worth is $5,000,000, or $1,000,000 if the franchisor is controlled by a corporation having a net worth of at least $5,000,000.
All stakeholders and members of the public are being encouraged to provide comments.
Comments on the proposed legislation may be submitted by e-mail or regular mail until December 10, 2014. Information on how to submit comments is available here: http://www.ag.gov.bc.ca/legislation/franchises/index.htm
Once the legislation is adopted, British Columbia will be the 6th province in Canada to regulate franchising, following the Provinces of Ontario, Alberta, Prince Edward Island, New Brunswick and Manitoba.