Bill Text: CA AB1782 | 2015-2016 | Regular Session | Enrolled
Bill Title: Franchises: offer to sell: trade show.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Vetoed) 2016-09-22 - Vetoed by Governor. [AB1782 Detail]
Download: California-2015-AB1782-Enrolled.html
BILL NUMBER: AB 1782 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 23, 2016
PASSED THE ASSEMBLY AUGUST 29, 2016
AMENDED IN SENATE AUGUST 19, 2016
AMENDED IN ASSEMBLY MARCH 10, 2016
INTRODUCED BY Assembly Member Maienschein
FEBRUARY 4, 2016
An act to amend, repeal, and add Sections 31013 and 31117 of, and
to add and repeal Sections 31020 and 31115.5 of, the Corporations
Code, relating to franchises.
LEGISLATIVE COUNSEL'S DIGEST
AB 1782, Maienschein. Franchises: offer to sell: trade show.
The Franchise Investment Law generally requires a franchisor to
register with the Department of Business Oversight before an offer or
sale of a franchise in this state and provides that a willful
violation of this law is a crime. Existing law provides, among other
things, that an offer or sale of a franchise is made in this state
when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or, if the franchisee is domiciled in this
state, the franchised business is or will be operated in this state.
Existing law provides that an offer to sell is not made in this state
merely because a radio or television program originating outside
this state is received in this state.
This bill would provide, until January 1, 2020, that an offer to
sell is not made in this state merely because a prospective
franchisor, or a franchisor who is not then offering a franchise for
sale in California and has not registered an offering under the
Franchise Investment Law, secures a space at a franchise trade show
from which it offers information about its products, services, or
system to the general public under specified circumstances,
including, among others, the payment of a fee. The bill would also
define a franchise trade show for purposes of the Franchise
Investment Law.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 31013 of the Corporations Code is amended to
read:
31013. (a) An offer or sale of a franchise is made in this state
when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or, if the franchisee is domiciled in this
state, the franchised business is or will be operated in this state.
(b) An offer to sell is made in this state when the offer either
originates from this state or is directed by the offeror to this
state and received at the place to which it is directed. An offer to
sell is accepted in this state when acceptance is communicated to the
offeror in this state; and acceptance is communicated to the offeror
in this state when the offeree directs it to the offeror in this
state reasonably believing the offeror to be in this state and it is
received at the place to which it is directed.
(c) An offer to sell is not made in this state merely because (1)
the publisher circulates or there is circulated on his behalf in this
state any bona fide newspaper or other publication of general,
regular, and paid circulation which has had more than two-thirds of
its circulation outside this state during the past 12 months, or (2)
a radio or television program originating outside this state is
received in this state.
(d) An offer to sell is not made in this state merely because a
franchisor, or a franchisor who is not then offering a franchise for
sale in California and has not registered an offering under the
provisions of Chapter 2 (commencing with Section 31110), secures a
space at a franchise trade show from which it offers information
about its products, services, or system to the general public if the
franchisor or prospective franchisor does all of the following:
(1) Notifies the commissioner, in a form established by the
commissioner, of its intent to attend and display its concept at the
franchise trade show at least 30 days before the show and provides
the commissioner with all of the following:
(A) A document, in a form established by the commissioner, that
includes, at a minimum, all of the following:
(i) The franchise concept brand name and a description of the
potential franchise offering.
(ii) The legal name, and, if applicable, the name under which the
franchisor or prospective franchisor does or intends to do business,
the address where it is domiciled, and the state or country, if
outside the United States, where it is organized.
(iii) The names of the directors, trustees, general partners,
principal officers, and other executives who will have management
responsibility of the franchisor or prospective franchisor.
(iv) The address where the franchisor or prospective franchisor
may be served legal process.
(v) Disclosure of any actions listed in Section 31115.5, against
the directors, trustees, general partners, principal officers, or
other executives who will have management responsibility of the
franchisor or prospective franchisor.
(vi) Disclosure of any actions listed in Section 31115.5, against
employees or representatives who will be attending the franchise
trade show on behalf of the franchisor or prospective franchisor.
(vii) The proposed written or electronic information that the
franchisor or prospective franchisor intends to distribute or use at
the trade show.
(B) If the franchisor or prospective franchisor already possesses
a current franchise disclosure document not yet registered in
California, a copy of the franchise disclosure document.
(2) Conspicuously posts in public view within its franchise trade
show booth a notice, in a form established by the commissioner, that
states, at a minimum, all of the following:
(A) The franchisor or prospective franchisor is not offering a
franchise for sale in California.
(B) The franchisor or prospective franchisor is not legally able
to offer a franchise for sale in California.
(C) If anyone associated with the franchisor or prospective
franchisor offers a franchise for sale or solicits an offer to
purchase a franchise in California, that action should be reported to
the commissioner.
(D) The contact information of the commissioner.
(e) The form described in paragraph (1) of subdivision (d) shall
be in the form and content prescribed by the commissioner, but, at a
minimum, shall state that it is unlawful for any person to offer or
sell a franchise in California unless the offer of the franchise has
been registered with the commissioner or is otherwise exempt.
(f) A franchisor or prospective franchisor requesting an exemption
from a requirement to register pursuant to subdivisions (d) and (e)
shall pay a fee of two hundred twenty-five dollars ($225) to the
commissioner for each day the franchisor or prospective franchisor
exhibits at the trade show.
(g) This section shall remain in effect only until January 1,
2022, and as of that date is repealed.
SEC. 2. Section 31013 is added to the Corporations Code, to read:
31013. (a) An offer or sale of a franchise is made in this state
when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or, if the franchisee is domiciled in this
state, the franchised business is or will be operated in this state.
(b) An offer to sell is made in this state when the offer either
originates from this state or is directed by the offeror to this
state and received at the place to which it is directed. An offer to
sell is accepted in this state when acceptance is communicated to the
offeror in this state, and acceptance is communicated to the offeror
in this state when the offeree directs it to the offeror in this
state reasonably believing the offeror to be in this state and it is
received at the place to which it is directed.
(c) An offer to sell is not made in this state merely because (1)
the publisher circulates or there is circulated on his behalf in this
state any bona fide newspaper or other publication of general,
regular, and paid circulation which has had more than two-thirds of
its circulation outside this state during the past 12 months, or (2)
a radio or television program originating outside this state is
received in this state.
(d) This section shall become effective on January 1, 2022.
SEC. 3. Section 31020 is added to the Corporations Code, to read:
31020. (a) "Franchise trade show" means an event in this state,
displaying multiple franchise brands and open to multiple
franchisors, that is advertised to, and invites, the general public
to that event where franchisors who satisfy the reasonable criteria
of the franchise trade show's organizer may secure a space from where
they can inform the members of the general public in attendance
about their existing and prospective products, services, or systems.
(b) This section shall remain in effect only until January 1,
2022, and as of that date is repealed.
SEC. 4. Section 31115.5 is added to the Corporations Code, to
read:
31115.5. (a) The commissioner may summarily issue a stop order
denying the effectiveness of an applicant's exemption application
pursuant to subdivisions (d), (e) and (f) of Section 31013, if the
commissioner finds any of the following:
(1) The proposed business model is not lawful in California.
(2) A director, trustee, general partner, principal officer, or
other executive who will have management responsibility of a
franchisor or prospective franchisor, or an employee or
representative who will be attending the franchise trade show on
behalf of the franchisor or prospective franchisor, has been any of
the following:
(A) Convicted of or pleaded nolo contendere to any felony.
(B) Held liable in a civil action by final judgment of a court for
fraud, embezzlement, or misappropriation of property.
(C) Previously violated any franchise law of any state.
(3) The business would constitute a misrepresentation to, or
deceit or fraud of, investors.
(4) The franchisor or prospective franchisor fails to meet the
requirements of subdivision (d) to (e), inclusive, of Section 31013.
(b) This section shall remain in effect only until January 1,
2022, and as of that date is repealed.
SEC. 5. Section 31117 of the Corporations Code is amended to read:
31117. (a) Upon the entry of a stop order under Section 31115 or
31115.5, the commissioner shall promptly notify the applicant that it
has been entered and of the reasons therefor and that upon receipt
of written request the matter will be set down for hearing to
commence within 15 business days after such receipt unless the
applicant consents to a later date. If no hearing is requested within
30 days after receipt of the notice and none is ordered by the
commissioner, the order will remain in effect until it is modified or
vacated by the commissioner. If a hearing is requested or ordered,
the commissioner, after notice and hearing in accordance with the
provisions of Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, in connection with
which the commissioner shall have all of the powers granted
thereunder, may modify or vacate the order or extend it until its
final determination.
(b) This section shall remain in effect only until January 1,
2022, and as of that date is repealed.
SEC. 6. Section 31117 is added to the Corporations Code, to read:
31117. (a) Upon the entry of a stop order under Section 31115,
the commissioner shall promptly notify the applicant that it has been
entered and of the reasons therefor and that upon receipt of written
request the matter will be set down for hearing to commence within
15 business days after such receipt unless the applicant consents to
a later date. If no hearing is requested within 30 days after receipt
of the notice and none is ordered by the commissioner, the order
will remain in effect until it is modified or vacated by the
commissioner. If a hearing is requested or ordered, the commissioner,
after notice and hearing in accordance with the provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, in connection with which the
commissioner shall have all of the powers granted thereunder, may
modify or vacate the order or extend it until its final
determination.
(b) This section shall become effective on January 1, 2022.
