General Penalty

COMPLIANCE UNIT, FRANCHISE DEVELOPMENT DIVISION

Functions Compliance Unit:

  • Receive complaints relating franchise dispute from a franchisor or franchisee.
  • Enforce the Franchise Act 1998.
  • Organize Franchise Mediation Session.
  • Gather and maintain data in regards of franchise complaints
  • Enforce the submission of Annual Reports Franchise Business.
  • Prepare reports to assist in the prosecution of cases the court.

Type of Offences

Pendaftaran Pemberi Francais:

Section Explanation
6 (2) (a) & (b)

Registration of franchisor:

(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 ;

  •   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
  • 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.
7

Application for registration:

(6) A person who submits false or misleading information or documents under this section commits an offence.

11

Amendments to disclosure documents:

(1) If there is any material change in the disclosure documents mentioned in paragraphs 7(1)(a) and (f), the applicant or his director or manager shall, with the approval of the Registrar, amend the documents according to the prescribed form.

(2) The documents in subsection (1) shall be filed with the Registrar.

(3) The Registrar may, at any time, require additional information on the amendments made under this section.

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

14 (5)

Registration of franchise broker:

(5) The registration under this section shall be effective for two years from the date of registration, unless determined otherwise by the Registrar.

  • (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.
15

Compulsory practice:

(1) A franchisor shall submit to a franchisee a copy of the franchise agreement and disclosure documents including amendments to the disclosure documents approved under section 11 at least ten days before the franchisee signs the agreement with the franchisor or after the disclosure documents is approved by the Registrar under section 11, whichever is applicable.

(2) The documents in subsection (1) shall be the same documents submitted to the Registrar under section 7.

(3) A person who fails to comply with this section commits an offence.

16 (4)

Annual report:

(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.

(2) The report shall contain the disclosure documents which have been updated.

(3) The Registrar may review the report and disclosure documents and ;

  • Notify the franchisor if any additional information or modification of the disclosure documents is to be included or deleted; or
  • Issue an order to suspend, terminate or cancel the approval of the registration of the franchise in the public interest or for the purpose of protecting prospective franchisees until any deficiencies specified by the Registrar have been corrected.

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

18 (4), (5) & (6)

Requirements of franchise agreement:

(4) A franchise agreement shall have a cooling off period, which shall be determined by both contracting parties but shall not be less than seven working days, during which the franchisee has the option to terminate the agreement.

(5) Upon termination of the franchise agreement under subsection (4), an amount to cover the reasonable expenses incurred by the franchisor to prepare the agreement may be retained by the franchisor from the initial fees paid under section 19; however, all other moneys shall be refunded to the franchisee.

(6) A person who fails to comply with subsection (5) commits an offence.

20

Prohibition against discrimination

Its hallbeanun fair franch is eandan offence under this Act for any franchisor toun reasonably and materially discriminate between franchisees operating a franchise in the charges offered or made for franchise fees,royalties,goods,services,equipment,rentals or advertising services if such discrimination will cause competitive harm to a franchisee who competes with a franchisee who receives the benefit of the discrimination,unless and to the extent that any classification of or discrimination between franchisees is ;

  • Based on franchises granted at different times, and such discrimination is reasonably related to the differences in time;
  • Related to one or more programmes for making franchises available to persons within sufficient capital, training,businessexperience or education,or lacking other qualifications;
  • Related to efforts by the Government or any of its agencies to promote variation in products or service lines or business formats or designs;
  • Related to efforts by one or more franchisees to cure deficiencies in the operation of franchised businesses or defaults in franchise agreements; or
  • Based on other reasonable distinctions considering the purposes of this Act and is not arbitrary.
22

Promotion Fund:

(1) A franchisor who requires a franchisee to make any payment for the purpose of the promotion of a franchise shall establish a Promotion Fund (“Fund”).

(2) The Fund shall be managed under a separate account and shall only be used for the promotion of the product under the franchise.

(3) If a franchisee is required to make any payment under section 23, the franchisor shall submit a financial statement of the Fund, which has been endorsed by a registered public accountant, to the Registrar within thirty days after the conclusion of the last financial term.

(4) The financial statement in subsection (3) shall be submitted to the Registrar together with the annual report under section 16.

(5) A person who fails to comply with this section commits an offence.

26 (3)

Confidential information:

(1) A franchisee shall give a written guarantee to a franchisor that the franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall not disclose to any person any information contained in the operation manual or obtained while undergoing training organized by the franchisor during the franchise term and for two years after the expiration or earlier termination of the franchise agreement.

(2) The franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall comply with the terms of the written guarantee given under subsection (1).

(3) A person who fails to comply with subsection (1) or (2) commits an offence.

27

Prohibition against similar business:

(1) A franchisee shall give a written guarantee to a franchisor that the franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall not carry on any other business similar to the franchised business operated by the franchisee during the franchise term and for two years after the expiration or earlier termination of the franchise agreement.

(2) The franchisee, including its directors, the spouses and immediate family of the directors, and his employees shall comply with the terms of the written guarantee given under subsection (1).

(3) A person who fails to comply with subsection (1) or (2) commits an offence.

32

Non-renewal of franchise agreement:

A franchisor commits an offence if he refuses to renew a franchise agreement or extend a franchise term without compensating a franchisee either by a repurchase or by other means at a price to be agreed to between the franchisor and the franchisee after considering the diminution in the value of the franchised business caused by the expiration of the franchise where ;

  • The franchisee is barred by the franchise agreement, or by the refusal of the franchisor at least six months before the expiration date of the franchise agreement to waive any portion of the franchise agreement which prohibits the franchisee, from continuing to conduct substantially the same business under another mark in the same area subsequent to the expiration of the franchise agreement; or
  • The franchisee has not been given a written notice of the franchisor’s intent not to renew the franchise agreement at least six months prior to the expiration date of the franchise agreement.
37

Offence for fraud, deceit, etc. :

(1) A person who, whether directly or indirectly ;

(a) employs any device or scheme in order to defraud;

(b) makes any untrue statement of a material fact or omits to state a material fact which renders his statement to be misleading;

(c) engages in any act, practice or course of business, which operates or would operate as a fraud or deceit upon any person, in relation to an offer to sell or a sale of a franchise, commits an offence and shall, on conviction, be liable ;

  • 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
  • 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.

(3) Subsection (1) shall also apply to a franchise broker or franchise consultant.

37 (A)

Offence of holding out as a franchise:

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 ;

  • 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
  • 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.
38

Obstruction of officers:

A person who ;

(a) Obstructs any person appointed under this Act acting in pursuance of this Act;

(b) Fails to comply with any requirement properly made to him by an authorized officer under this Act; or

(c) Without reasonable cause fails to give to an authorized officer any assistance or information which may reasonably be required by the officer for the purpose of the performance of his duties under this Act, commits an offence.

General Penalty:

Section
Explanation
39

General penalty:

(1) A person who commits an offence under this Act for which no penalty is expressly provided shall, on conviction, be liable ;

  • If such person is a body corporate, to a fine of not less than ten thousand ringgit and not more 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
  • 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.

(2) Upon sentencing a franchisor for an offence under this section, the court may ;

  • Declare the franchise agreement between the franchisor and any franchisee to be null and void;
  • Order that the franchisor refunds any form of payment which he has obtained from any franchisee; or
  • Prohibit the franchisor from making any new franchise agreement or appointing any new franchisee.

Compounding:

Section
Explanation
41

(1) The Registrar may, with the consent in writing of the Public Prosecutor, compound any offence committed by any person under this Act and prescribed by the Minister to be a compoundable offence by making a written offer to the person suspected to have committed the offence to compound the offence upon payment to the Registrar of an amount of money not exceeding fifty per cent of the amount of maximum fine for that offence within the time specified in the offer.

(2) An offer under subsection (1) may be made at any time after the offence has been committed, but before any prosecution for it has been instituted.

(3) If the amount specified in the offer is not paid within the time specified in the offer or within such extended period as the Registrar may grant, prosecution for the offence may be instituted at any time after that against the person to whom the offer was made.

(4) If an offence has been compounded under subsection (1), no prosecution shall be instituted in respect of the offence against the person to whom the offer to compound was made.

(5) All sums of money received by the Registrar under this section shall be paid into and form part of the Federal Consolidated Fund.

Complaints by the franchisor or franchisee

Any complaints by the franchisor or franchisee should be made to complete by Franchise Official Complaint Form which can be obtained for free from Franchise Development Division, MDTCC or by visiting www.franchisemdtcc.gov.my.

Submission of Annual Report Business

Under the Franchise Act 1998, the franchisor or master franchisee who is registered under Section 6 of the Franchise Act 1998 is a MUST to submit the Annual Report of Business by completing BAF 6 within 180 days from the date of the financial year end. In Section 6, 6 (A) and 6 (B), any person who fails to submit the annual report to the Registrar of Franchise, MDTCC is commits an offense.

Some of the information required in Form BAF 6 is as follows:

  1. The number / name / address / franchise outlets following:
    • Outlet belonging to the company;
    • Outlet belong to franchisees in the country, and
    • Outlet belonging to overseas franchisees.
  2. The annual return;
  3.   Current disclosure documents; and
  4. The latest audited financial statements.

BAF Form 6 is available for free at Franchise Development Division, KPDNKK.

All inquiries or complaints can be contacted:

Compliance unit
Franchise Development Division
Ministry of Domestic Trade, Co-operatives and Consumerism
Level 1, Tower Block, No.13 Persiaran Perdana, Precinct 2
62623 Putrajaya

Tel: 03-8882 5585
Faks: 03-8882 5583


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