On October 5, 2015, the British Columbia provincial government introduced Bill 38 – the Franchises Act, the long awaited franchise legislation for that province. Joining Alberta, Ontario, Prince Edward Island, New Brunswick, and Manitoba, all of which already have franchise legislation, it is no surprise that the proposed Act mirrors the franchise laws in those provinces for the most part.
Having said that, and being the latest province to hold consultations on the development of franchise laws, the proposed legislation in British Columbia also contains certain differences that may be welcomed in the franchising community as a possible resolution to the issues encountered by the franchise legislation in Ontario. In particular, the proposed legislation has the following differences from its counterpart in Ontario:
- The legislation does not apply to “an arrangement arising out of an agreement for the purchase and sale of a reasonable amount of goods at a reasonable wholesale price, or for the purchase of a reasonable amount of services at a reasonable price”, although it is unknown what this exemption refers to.
- A franchise disclosure document may be delivered by email.
- Non-disclosure agreements and agreements designating the proposed location or territory for a franchise are permitted prior to delivery of a franchise disclosure document subject to certain conditions.
- Fully refundable deposits may be paid by a prospective franchisee prior to disclosure provided that they do not exceed a certain amount to be prescribed in the regulations and which do not obligate the franchisee to enter into a franchise agreement.
- A franchise disclosure document or statement of material change will comply with the legislation if it “substantially complies” with the legislation notwithstanding any defect in form, a technical irregularity or error.
The Bill will now progress to Second Reading and debate within the legislature for its main principles and purpose. If it passes this stage, and expectations currently are that it will, the Bill will then go to Committee where a clause-by-clause analysis will take place with possible amendments to its wording. For this reason, the differences cited above may or may not be in their current format if the Bill ever reaches its Third Reading and Royal Assent into law.
As with franchise legislation that preceded this Bill in other provinces, there is also the all important step of coming up with the wording and requirements to be applied from the regulations that will accompany the legislation. If the proposed legislation is any indication, the regulations will also be expected to be similar to those franchise regulations in the other provinces. However, as the saying goes, the “devil will be in the details” of those regulations and it remains unknown whether there will be any differences until the regulations are actually prepared.
We will continue to monitor the status of franchise specific legislation in British Columbia and advise you of any developments as they may occur.