British Columbia Modernizes Franchise Law
On November 17, 2015, Bill 38, the British Columbia Franchises Act (B.C. Act), received royal assent. The B.C. Act provides a substantially similar regime to franchise legislation in other Canadian jurisdictions; as such, although this is a significant change in the regulation of franchises in B.C., we anticipate only a minor impact on franchises operating in multiple provinces, including British Columbia.
The B.C. Act was introduced in the legislature on October 5, 2015, and will come into force on a later date by regulation of the lieutenant governor in council. Considering that consultations for the enactment of the B.C. Act began in March 2013, the progression of the B.C. Act through the legislative process has been particularly swift.
With the enactment of the B.C. Act, Canada’s third-largest province will join Ontario, Alberta, Manitoba, New Brunswick and Prince Edward Island as jurisdictions having provincial legislation governing franchises. The B.C. Act contains provisions substantially similar to those provided in the franchise legislation of the other provinces, such as:
- A disclosure obligation of the franchisor to provide prospective franchisees with financial and other relevant information about the franchise in one disclosure document at least 14 days before the earlier of the signing of any franchise agreement and the payment of any consideration relating to the franchise
- A duty of fair dealing imposed on both the franchisor and the franchisee in the performance and enforcement of the franchise agreement, including in the exercise of a right under the franchise agreement
- A franchisee’s right of rescission upon a franchisor’s failure to provide a satisfactory disclosure document
- A franchisee’s right of action against the franchisor and related personnel if the franchisee suffers a loss because of a franchisor’s misrepresentation in a disclosure document or failure to provide a satisfactory disclosure document
- Authority to void any provision in a franchise agreement purporting to restrict the application of B.C. laws
The B.C. Act is intended to benefit franchisors by continuing to establish uniform regulatory regimes across Canada and standardize franchise practices already followed by more sophisticated franchisors. Likewise, the B.C. Act will provide appropriate and needed legal protection to B.C. franchisees who are typically small business operators.
Despite the significance of the enactment of the B.C. Act to the governance of franchise operations in B.C., we anticipate most Canadian and U.S. franchisors will experience minimal change in their franchise operations as most are already franchising in other provinces regulated by similar franchise legislation. Most franchisors will simply need to make minor adjustments to their disclosure documents, which are already compliant with other franchise legislation, to comply with substantially similar provisions in the B.C. Act.
The authors wish to acknowledge and thank Minji Park (Student-at-Law) for her contribution to this Bulletin.
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