On Tuesday October 20, 2015, Bill 38, the Franchises Act, successfully passed
third reading. The Government of British Columbia first introduced
the bill on October 6, 2015, and it is now in its final stage of
enactment. The Franchises Act will come into force upon
Royal Assent which is expected to be granted towards the end of
2016 or early in 2017.
Once in force, the legislation would make British Columbia the
sixth province to adopt a regime for the regulation of franchises.
The framework used for drafting the Franchises Act is
based on the model franchise act recommended by the Uniform Law Conference and the 2013 report of
the British Columbia Law Institute.
The Government of British Columbia cited the concern that
franchisees are often disadvantaged with respect to the relational
balance of power between franchisors and franchisees as being the
motivation for enacting the Franchises Act. This imbalance
can occur as a result of the fact that while franchisees make
significant capital investment into a franchise, they often have a
lack of knowledge, experience and access to expert advice, and are
reliant on the information provided by the franchisors.
To alleviate this concern, the Franchises Act seeks to
regulate the sales of franchises in British Columbia by, among
other things, establishing requirements for pre-sale information
disclosure and providing franchisees with added legal rights and
protections relating to dispute resolution.
Specifically, the Franchises Act will require
franchisors to disclose and produce, prior to the parties entering
into a franchise agreement, a franchise disclosure document (the
"FDD"). The FDD will often include items such as a
description of the business opportunity, a list of all fees and
costs a franchisee must pay to operate and acquire the business,
and details of any litigation involving the franchisor or its
In addition to these disclosure requirements, the Franchises
Act will further shift the balance of power by providing
franchisees with legal remedies in the event of a material
misrepresentation or failure to comply with the outlined FDD
requirements by the franchisor. The remedies available to
franchisees will go as far as potentially allowing for rescission
of the franchise agreement depending on the specific
Furthermore, franchisees will benefit from the jurisdictional
provisions introduced in the Franchises Act that prohibit
any attempts to restrict the application of the law of British
Columbia to a franchise agreement, or to mandate a venue outside
British Columbia for dispute resolution. It has been observed that
that this could save franchisees from potentially exposing
themselves to the significant costs associated with litigation in
the home jurisdiction of a franchisor as it is often the case that
franchisors in the relationship are based outside of British
While it may seem that the Franchises Act introduces
changes that heavily lean in the favour of franchisees, the
franchisors' interests have not been completely overlooked by
the legislators. The Franchises Act will benefit
franchisors and facilitate compliance with the added disclosure
requirements by incorporating a substantial compliance component to
the regime. Franchisors will be able to rely on this substantial
compliance provision when preparing the FDD. Such a measure could
help franchisors avoid the types of litigation often seen in
Ontario where franchisees sue based on minor incompliances with
disclosure requirements in the overriding statute.
Assuming Royal Assent is granted to the Bill, future prospective
franchisees in British Columbia will be entitled to access to the
levels of information and the legal protections currently afforded
to franchisees in most of Canada. On the other hand, franchisors
will be given some leeway towards complying with the new disclosure
requirements under the substantial compliance provisions.
Critics of anticipated changes raise the concern that the added
regulatory burden introduced in the Franchises Act could
inhibit business in British Columbia. Though franchisors accustomed
to conducting business in the provinces where regulatory regimes
over franchsises are in place will likely be unaffected by the new
regulatory scheme, franchisors that deal exclusively within British
Columbia will be forced to adapt to these changes and could face
added costs in doing so. Whether or not the critics are correct
that these new burdens will encumber franchisors in British
Columbia to such a point that business is negatively affected
remains to be seen. However, if the five previously mentioned
provinces' willingness to adopt regulatory regimes is any
indication, this should not be the case.
Wish special thanks to articling student Andrew Ross for his
assistance with the preparation of this article.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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