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Amendment Act

Franchise (Amendment) Act 2012

Feedback & supportAmends the Franchise Act 1998

Official textFrom Laws of Malaysia Online, unchanged

(1)

This Act may be cited as the Franchise (Amendment)

Act 2012.

(2)

This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette.

s 2Amendment of section 3

The Franchise Act 1998 [Act 590], which is referred to as the

“principal Act” in this Act, is amended in section 3—

(a)

in subsection (1), by inserting after the words “the sale”

the words “and operation”; and

(b)

in subsection (2)—

(i)

by inserting after the words “The sale” the words

“and operation”; and

(ii)

in subparagraph (a)(ii), by inserting after the word

“within” the words “or outside”.

franchise (amendment) ACT 2012

4

s 3Amendment of section 4

Section 4 of the principal Act is amended—

(a)

in the definition of “franchise”—

(i)

in paragraph (c), by inserting after the words

“franchise system;” the word “and”;

(ii)

by deleting paragraphs (d) and (f); and

(iii)

by substituting for the word “; and” at the end of paragraph (e) a full stop; and

(b)

by inserting after the definition of “franchise broker” the following definition:

‘ “franchise consultant” means a person who provides advice and consultancy services to another person on the registration of a franchise business and compliance of the related laws;’.

s 4Substitution of section 6

The principal Act is amended by substituting for section 6

the following section:

s 6“Registration of franchisor

(1)

A franchisor shall register his franchise with the

Registrar before he can operate a franchise business or make an offer to sell the franchise to any person.

(2)

Any franchisor who fails to comply with this section, unless exempted by the Minister under section 58, commits an offence and shall, on conviction, be liable—

(a)

if such person is a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit, and for a second or subsequent offence, to a fine not exceeding five hundred thousand ringgit; or

(b)

if such person is not a body corporate, to a fine not exceeding one hundred thousand ringgit or to imprisonment for a term not exceeding one year or

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Franchise (Amendment)

to both, and for a second or subsequent offence, to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both.”.

s 5New sections 6a and 6b

The principal Act is amended by inserting after section 6 the following sections:

“Registration of franchisee of foreign franchisor 6a.  (1)  Before commencing the franchise business, a franchisee who has been granted a franchise from a foreign franchisor shall apply to register the franchise with the Registrar by using the prescribed application form and such application shall be subject to the Registrar’s approval.

(2)

The Registrar may impose any conditions for the approval of registration of franchise referred to in subsection (1).

(3)

Where a franchisee has been granted approval from a foreign franchisor to sell the franchise, the franchisee shall register such approval.

Registration of franchisee 6b.  A franchisee who has been granted a franchise from a local franchisor or local master franchisee shall register the franchise with the Registrar by using the prescribed registration form within fourteen days from the date of signing of the agreement between the franchisor and franchisee.”.

s 6Amendment of section 10

The principal Act is amended by substituting for section 10

the following section:

s 10“Period of effectiveness

The registration of a franchise shall continue to be effective unless the Registrar issues a written order to the franchisor, to suspend, terminate or cancel the registration of the franchise under this Act.”.

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s 7Amendment of section 11

Section 11 of the principal Act is amended—

(a)

in subsection (1), by inserting after the word “shall” the words “, with the approval of the Registrar,”; and

(b)

by inserting after subsection (3) the following subsection:

“(4)  Any person who fails to comply with this section commits an offence.”.

s 8Amendment of section 12

Subsection 12(1) of the principal Act is amended by substituting for the words “, prohibit or deny the sale or” the words “or cancel the approval of the”.

s 9Amendment of section 13

Section 13 of the principal Act is amended by substituting for subsection (2) the following subsection:

“(2)  The Registrar shall cancel the registration of the franchise from the register if he is satisfied that—

(a)

the franchisor has failed to submit his annual report to the

Registrar as stipulated under section 16 for the duration of five years continuously;

(b)

the franchisor is insolvent; or

(c)

the franchisor is no longer granting rights under the franchise.”.

s 10Amendment of section 14

Section 14 of the principal Act is amended—

(a)

by inserting after the words “franchise broker” wherever appearing the words “or franchise consultant”;

(b)

in subsection (5), by substituting for the words “one year”

the words “two years”; and

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Franchise (Amendment)

(c)

by inserting after subsection (5) the following subsections:

“(5a)  The franchise broker or franchise consultant shall apply for the renewal of registration within thirty days from the date of the expiration of the registration.

(5b)

Any franchise broker or franchise consultant who fails to comply with subsection (5a) commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit, and for a second or subsequent offence, to a fine not exceeding twenty-five thousand ringgit.”.

s 11Amendment of section 15

Section 15 of the principal Act is amended—

(a)

in subsection (1)—

(i)

by inserting after the words “disclosure documents”

the words “including amendments to the disclosure documents approved under section 11”; and

(ii)

by inserting after the words “with the franchisor”

the words “or after the disclosure documents is approved by the Registrar under section 11, whichever is applicable”; and

(b)

in subsection (2)—

(i)

by deleting the word “disclosure”; and

(ii)

by inserting after the word “Registrar” the words

“under section 7”.

s 12Amendment of section 16

Section 16 of the principal Act is amended—

(a)

by substituting for subsection (1) the following subsection:

“(1)  The franchisor shall, within six months from the end of each financial year of the franchise business, submit a report to the Registrar in the prescribed form.”;

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(b)

in paragraph (3)(b), by substituting for the words “, prohibit or deny the sale or” the words “or cancel the approval of the”; and

(c)

by inserting after subsection (3) the following subsection:

“(4)  Any person who fails to comply with this section commits an offence.”.

s 13Amendment of section 19

Section 19 of the principal Act is amended by inserting after the word “writing” the words “in the disclosure document”.

s 14Amendment of section 20

Section 20 of the principal Act is amended by substituting for the words “a contravention of this Act” the words “an offence under this Act”.

s 15Amendment of section 26

Section 26 of the principal Act is amended—

(a)

in subsection (1), by substituting for the words “the franchisee and his employees” the words “the franchisee, including its directors, the spouses and immediate family of the directors, and his employees”; and

(b)

in subsection (2), by substituting for the words “The franchisee and his employees” the words “The franchisee, including its directors, the spouses and immediate family of the directors, and his employees”.

s 16Amendment of section 27

Section 27 of the principal Act is amended—

(a)

in subsection (1), by substituting for the words “the franchisee and his employees” the words “the franchisee, including its directors, the spouses and immediate family of the directors, and his employees”; and

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Franchise (Amendment)

(b)

in subsection (2), by substituting for the words “The franchisee and his employees” the words “The franchisee, including its directors, the spouses and immediate family of the directors, and his employees”.

s 17Amendment of section 28

Subsection 28(1) of the principal Act is amended by inserting after the word “bind” the words “a franchisor or”.

s 18Amendment of section 29

Section 29 of the principal Act is amended by inserting after subsection (2) the following subsection:

“(3)  The franchisee shall operate the business separately from the franchisor, and the relationship of the franchisee with the franchisor shall not at anytime be regarded as a partnership, service contract or agency.”.

s 19Amendment of section 31

Section 31 of the principal Act is amended—

(a)

in subsection (1), by inserting after the word “franchisor”

the words “or franchisee”;

(b)

in paragraphs (2)(a) and (2)(b), by inserting after the words “the failure of” the words “a franchisor or”;

and

(c)

in subsection (3)—

(i)

by inserting after the words “in which the” the words “franchisor or”; and

(ii)

by inserting after paragraph (a) the following paragraph:

“(aa) becomes bankrupt or insolvent;”.

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s 20Amendment of section 34

Section 34 of the principal Act is amended by substituting for subsection (1) the following subsection:

“(1)  A franchisee may, at his option, apply for an extension of the franchise term by giving a written notice to the franchisor not less than six months prior to the expiration of the franchise term.”.

s 21Amendment of section 37

Section 37 of the principal Act is amended—

(a)

by renumbering the existing section as subsection (1);

(b)

in subsection (1), by inserting after the words “commits an offence” the words “and shall, on conviction, be liable—

(a)

if such person is a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit, and for a second or subsequent offence, to a fine not exceeding five hundred thousand ringgit; or

(b)

if such person is not a body corporate, to a fine not exceeding one hundred thousand ringgit or to imprisonment for a term not exceeding one year or to both, and for a second or subsequent offence, to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both.”;

and

(c)

by inserting after subsection (1) the following subsection:

“(2)  Subsection (1) shall also apply to a franchise broker or franchise consultant.”.

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Franchise (Amendment)

s 22New section 37a

The principal Act is amended by inserting after section 37

the following section:

“Offence of holding out as a franchise 37a.  A person who assumes or uses in relation to its business, the term “franchise” or any of its derivatives or any other words indicating the carrying on of a franchise business, including the use of the word “franchise” or any abbreviation thereof as part of the name or title in documents, agreements, books, advertisements or publications, without approval of registration by the Registrar under section 8

commits an offence and shall, on conviction, be liable—

(a)

if such person is a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit, and for a second or subsequent offence, to a fine not exceeding five hundred thousand ringgit; or

(b)

if such person is not a body corporate, to a fine not exceeding one hundred thousand ringgit or to imprisonment for a term not exceeding one year or to both, and for a second or subsequent, offence to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both.”.

s 23Amendment of section 38

Section 38 of the principal Act is amended by deleting the words “and shall, on conviction be liable to a fine not exceeding two thousand ringgit or to imprisonment for a term not exceeding six months or to both”.

s 24Amendment of section 39

Section 39 of the principal Act is amended—

(a)

in subsection (1), by substituting for paragraphs (a)

and (b) the following paragraphs:

“(a) if such person is a body corporate, to a fine of not less than ten thousand ringgit and not more

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than fifty thousand ringgit, and for a second or subsequent offence, to a fine of not less than twenty thousand ringgit and not more than one hundred thousand ringgit; or

(b)

if such person is not a body corporate, to a fine of not less than five thousand ringgit and not more than twenty-five thousand ringgit or to imprisonment for a term not exceeding six months, and for a second or subsequent offence, to a fine of not less than ten thousand ringgit and not more than fifty thousand ringgit or to imprisonment for a term not exceeding one year.”; and

(b)

in subsection (2), by substituting for the words “a first offence” the words “an offence under this section”.

s 25Deletion of section 55

The principal Act is amended by deleting section 55.

s 26Deletion of section 57

The principal Act is amended by deleting section 57.

s 27Amendment of section 60

Subsection 60(2) of the principal Act is amended—

(a)

by substituting for the word “ten” the word “fifty”; and

(b)

by substituting for the words “five years” the words

“one year”.

KUALA LUMPUR