Ontario is poised to introduce new rules that will be of
interest to all franchisors in the province. Last week, the
Ministry of Government and Consumer Services proposed amendments to
regulations made under the Arthur Wishart Act (Franchise
Disclosure), 2000, SO 2000, c 3 (the
"Act") that would modernize the
authorized methods for delivery of disclosure documents by allowing
delivery by electronic transmission or courier. These amendments
have not yet been approved and are currently open for comment by
Under the Act, franchisors are required to deliver a disclosure
document to prospective franchisees that sets out all material
facts about the franchise being offered. The disclosure document is
of fundamental importance to both parties. Franchisors must deliver
the disclosure document to prospective franchisees at least 14
clear days prior to a franchise agreement being signed or any
payment being made in respect of a franchise. Disclosure documents
are also routinely provided to existing franchisees in
circumstances such as renewal.
As the law currently stands, franchisors are required to deliver
the disclosure document personally or by registered mail. Of
course, in 2016, businesses more commonly rely on other methods to
deliver important documents. The Act also provides that other
delivery methods may be prescribed by regulation, and the proposed
amendment does precisely this.
If approved, the proposed amendment to Sections 12 and 13 of
Ontario Regulation 581/00 (the
"Amendment") would allow franchisors to
deliver disclosure documents by prepaid courier or by electronic
transmission, such as email. In order for a franchisor to deliver a
disclosure document by electronic transmission, the Amendment would
require that the document be delivered in a form that enables the
recipient to view, store, retrieve and print it; that it contain no
links to external documents or content; and that it contain an
index for each separate electronic file of the document setting out
the file name and, if the file name is not sufficiently
descriptive, a statement of the subject matter. Electronic delivery
of a document would not be effective until the franchisor received
an electronic acknowledgement of receipt.
A second change proposed by the Amendment would permit a
franchisee to deliver notice of rescission to the franchisor by
prepaid courier. Under the Act, a prospective franchisee may be
permitted to rescind a franchise agreement in the event that the
disclosure document or a material change statement provided by the
franchisor was not provided in accordance with the Act.
The proposed Amendment would bring Ontario up to speed with most
other provinces that currently have franchise disclosure
legislation. Manitoba, New Brunswick and Prince Edward Island have
long allowed electronic delivery of franchise disclosure documents.
British Columbia's Franchises Act, which passed third
reading in late 2015 but is not yet proclaimed, would allow
delivery of disclosure documents by email. Alberta stands alone in
not prescribing any particular means for the delivery of disclosure
The proposed Amendment is an important step that offers
increased speed and efficiency of delivery and reduced transaction
costs for franchisors. The changes come partially in response to
lobbying by franchisors and their advocates, including the Canadian
Franchise Association, along with other interested parties such as
the Ontario Bar Association.
The draft Amendment is posted on the government's Regulatory
Registry website until May 2, 2016. McMillan has submitted comments
to the Ministry of Government and Consumer Services on the
Amendment and would be pleased to submit comments on behalf of
clients on request. Interested parties may review the full text of
the draft Amendment, and may provide comments directly if they
wish, at http://www.ontariocanada.com/registry/view.do?postingId=21482.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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