Bill Text: IL SB1285 | 2009-2010 | 96th General Assembly | Enrolled

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Bill Title: Amends the General Not For Profit Corporation Act of 1986. Provides that voting members or their proxies, belonging to a not-for-profit corporation, may conduct elections for directors, officers, or representatives by mail, email, or other electronic means if the corporation's bylaws so provide (instead of conducting elections for directors and officers exclusively by first-class mail only).

Sponsorship: Partisan Bill (Democrat 1)

Status: (Passed) 2009-08-24 - Public Act . . . . . . . . . 96-0648 [SB1285 Detail]

Download: Illinois-2009-SB1285-Enrolled.html

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AN ACT concerning business.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The General Not For Profit Corporation Act of
1986 is amended by changing Section 107.50 as follows:
(805 ILCS 105/107.50) (from Ch. 32, par. 107.50)
Sec. 107.50. Proxies. A member entitled to vote may vote in
person or, unless the articles of incorporation or the bylaws
otherwise provide, by proxy executed in writing by the member
or by that member's duly authorized attorney-in-fact. No proxy
shall be valid after 11 months from the date of its execution,
unless otherwise provided in the proxy. Where directors, or
officers, or representatives are to be elected by members, the
bylaws may provide that such elections may be conducted by
mail, email, or other electronic means.
(Source: P.A. 84-1423.)
Section 10. The Illinois Business Brokers Act of 1995 is
amended by changing Section 10-80 as follows:
(815 ILCS 307/10-80)
Sec. 10-80. Persons exempt from registration and other
duties under law; burden of proof thereof.

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(a) The following persons are exempt from the requirements
of this Act:
(1) Any attorney who is licensed to practice in this
State, while engaged in the practice of law and whose
service in relation to the business broker transaction is
incidental to the attorney's practice.
(2) Any person licensed as a real estate broker or
salesperson under the Illinois Real Estate License Act of
2000 who is primarily engaged in business activities for
which a license is required under that Act and who, on an
incidental basis, acts as a business broker.
(3) Any dealer, salesperson, or investment adviser
registered pursuant to the Illinois Securities Law of 1953
or any investment adviser representative, or any person who
is regularly engaged in the business of offering or selling
securities in a transaction exempted under subsection C, H,
M, R, Q, or S of Section 4 of the Illinois Securities Law
of 1953 or subsection G of Section 4 of the Illinois
Securities Law of 1953 provided that such person is
registered pursuant to federal securities law.
(4) An associated person described in subdivision
(h)(2) of Section 15 of the Federal 1934 Act.
(5) An investment adviser registered pursuant to
Section 203 of the Federal 1940 Investment Advisors Act.
(6) A person described in subdivision (a)(11) of
Section 202 of the Federal 1940 Investment Advisors Act.

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(7) Any person who is selling a business owned or
operated (in whole or in part) by that person in a one time
transaction.
(b) This Act shall not be deemed to apply in any manner,
directly or indirectly, to: (i) a State bank or national bank,
as those terms are defined in the Illinois Banking Act, or any
subsidiary of a State bank or national bank; (ii) a bank
holding company, as that term is defined in the Illinois Bank
Holding Company Act of 1957, or any subsidiary of a bank
holding company; (iii) a foreign banking corporation, as that
term is defined in the Foreign Banking Office Act, or any
subsidiary of a foreign banking corporation; (iv) a
representative office, as that term is defined in the Foreign
Bank Representative Office Act; (v) a corporate fiduciary, as
that term is defined in the Corporate Fiduciary Act, or any
subsidiary of a corporate fiduciary; (vi) a savings bank
organized under the Savings Bank Act, or a federal savings bank
organized under federal law, or any subsidiary of a savings
bank or federal savings bank; (vii) a savings bank holding
company organized under the Savings Bank Act, or any subsidiary
of a savings bank holding company; (viii) an association or
federal association, as those terms are defined in the Illinois
Savings and Loan Act of 1985, or any subsidiary of an
association or federal association; (ix) a foreign savings and
loan association or foreign savings bank subject to the
Illinois Savings and Loan Act of 1985, or any subsidiary of a

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foreign savings and loan association or foreign savings bank;
or (x) a savings and loan association holding company, as that
term is defined in the Illinois Savings and Loan Act of 1985,
or any subsidiary of a savings and loan association holding
company.
(b-1) Any franchise seller as defined in the Federal Trade
Commission rule entitled Disclosure Requirements and
Prohibitions Concerning Franchising, 16 C.F.R. Part 436, as it
may be amended, is exempt from the requirements of this Act.
Persons registered under the Illinois Franchise Disclosure Act
of 1987 (and their employees) are exempt from the requirements
of this Act as to: offers and sales in connection with
franchising activities; or assisting any of their franchisees
in the offer or sale of a franchise by any such franchisee for
the franchisee's own account regardless of whether the sale is
effected by or through the registered persons.
(b-2) Any certified public accountant licensed to practice
in Illinois, while engaged in the practice as a certified
public accountant and whose service in relation to the business
broker transaction is incidental to his or her practice, is
exempt from the requirements of this Act.
(b-3) Any publisher, or regular employee of such publisher,
of a bona fide newspaper or news magazine of regular and
established paid circulation who, in the routine course of
selling advertising, advertises businesses for sale and in
which no other related services are provided is exempt from the

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requirements of this Act.
(c) The burden of proof of any exemption or classification
provided in this Act shall be on the party claiming the
exemption or classification.
(Source: P.A. 90-70, eff. 7-8-97; 91-245, eff. 12-31-99.)
Section 15. The Business Opportunity Sales Law of 1995 is
amended by changing Sections 5-10, 5-30 and 5-35 as follows:
(815 ILCS 602/5-10)
Sec. 5-10. Exemptions. Registration pursuant to Section
5-30 shall not apply to any of the following:
(a) Any offer or sale of a business opportunity for which
the immediate cash payment made by the purchaser for any
business opportunity is at least $25,000 if the immediate cash
payment does not exceed 20% of the purchaser's net worth as
determined exclusive of principal residence, furnishings
therein, and automobiles; provided, however, the Secretary of
State may by rule or regulation withdraw or further condition
the availability of this exemption.
(b) Any offer or sale of a business opportunity which the
seller does not advertise, solicit, or sell for an initial
payment to the seller or a person recommended by the seller
exceeding $500.
(c) Any offer or sale of a business opportunity where the
seller has a net worth of not less than $1,000,000 as

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determined on the basis of the seller's most recent audited
financial statement, prepared within 13 months of the first
offer in this State. Net worth may be determined on a
consolidated basis where the seller is at least 80% owned by
one person and that person expressly guarantees the obligations
of the seller with regard to the offer or sale of any business
opportunity claimed to be exempt under this subsection. The
Secretary of State may by rule or regulation withdraw or
further condition the availability of this exemption.
(d) Any offer or sale of a business opportunity where the
purchaser has a net worth of not less than $250,000. Net worth
shall be determined exclusive of principal residence,
furnishings therein, and automobiles. The Secretary of State
may by rule or regulation withdraw or further condition the
availability of this exemption.
(e) Any offer or sale of a business opportunity where the
purchaser is a bank, savings and loan association, trust
company, insurance company, credit union, or investment
company as defined by the federal Investment Company Act of
1940, pension or profit sharing trust, or other financial
institution or institutional buyer, or a dealer registered
under the Illinois Securities Law of 1953, where the purchaser
is acting for itself or in a fiduciary capacity.
(f) Any offer or sale of a business opportunity which is
defined as a franchise under the Franchise Disclosure Act of
1987 provided that the seller delivers to each purchaser 14 at

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the earlier of the first personal meeting, or 10 business days
prior to the earlier of the execution by a purchaser of any
contract or agreement imposing a binding legal obligation on
the purchaser or the payment by a purchaser of any
consideration in connection with the offer or sale of the
business opportunity, a disclosure document prepared in
accordance with the requirements of Section 16 of the Illinois
Franchise Disclosure Act of 1987, as it may be amended. one of
the following disclosure documents:
(1) The Franchise Offering Circular provided for under
the Franchise Disclosure Act of 1987 which the Secretary of
State may adopt by rule or regulation; or
(2) A disclosure document prepared pursuant to the
Federal Trade Commission rule entitled Disclosure
Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures, 16 C.F.R. Sec. 436 (1979).
For the purposes of this subsection, a personal meeting
shall mean a face-to-face meeting between the purchaser and
the seller or their representatives, which is held for the
purpose of discussing the offer or sale of a business
opportunity.
(g) Any offer or sale of a business opportunity for which
the cash payment required to be made by a purchaser for any
business opportunity does not exceed $500 and the payment is
made for the not-for-profit sale of sales demonstration
equipment, material, or samples or the payment is made for

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product inventory sold to the purchaser at a bona fide
wholesale price.
(h) Any offer or sale of a business opportunity which the
Secretary of State exempts by order or a class of business
opportunities which the Secretary of State exempts by rule or
regulation upon the finding that such exemption would not be
contrary to public interest and that registration would not be
necessary or appropriate for the protection of purchasers.
(Source: P.A. 91-809, eff. 1-1-01.)
(815 ILCS 602/5-30)
Sec. 5-30. Registration.
(a) In order to register a business opportunity, the seller
shall file with the Secretary of State one of the following
disclosure documents with the appropriate cover sheet as
required by subsection (b) of Section 5-35 of this Law, a
consent to service of process as specified in subsection (b) of
this Section, and the appropriate fee as required by subsection
(c) of this Section which is not returnable in any event:
(1) The Business Opportunity Disclosure Document
Franchise Offering Circular which the Secretary of State
may prescribe by rule or regulation; or
(2) A disclosure document prepared pursuant to the
Federal Trade Commission rule entitled Disclosure
Requirements and Prohibitions Concerning Franchising, 16
C.F.R. Part 436, or the Federal Trade Commission rule

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entitled Disclosure Requirements and Prohibitions
Concerning Business Opportunities, 16 C.F.R. Part 437, as
they may be amended and Business Opportunity Venture, 16
C.F.R. Sec. 436 (1979). The Secretary of State may by rule
or regulation adopt any amendment to the disclosure
document prepared pursuant to 16 C.F.R. Sec. 436 (1979),
that has been adopted by the Federal Trade Commission; or
(3) A disclosure document prepared pursuant to
subsection (b) of Section 5-35 of this Law.
(b) Every seller shall file, in the form as the Secretary
of State may prescribe, an irrevocable consent appointing the
Secretary of State or the successor in office to be the
seller's attorney to receive service of any lawful process in
any noncriminal suit, action or proceeding against the seller
or the seller's successor, executor or administrator which
arises under this Law after the consent has been filed, with
the same force and validity as if served personally on the
person filing the consent. Service may be made by delivering a
copy of the process in the office of the Secretary of State,
but is not effective unless the plaintiff or petitioner in a
suit, action or proceeding, forthwith sends notice of the
service and a copy of the process by registered or certified
mail, return receipt requested, to the defendant's or
respondent's most current address on file with the Secretary of
State, and the plaintiff's affidavit of compliance with this
subsection is filed in the case on or before the return date of

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the process, if any, or within such further time as the court
allows.
(c)(1) The Secretary of State shall by rule or regulation
impose and shall collect fees necessary for the
administration of this Law including, but not limited to,
fees for the following purposes:
(A) filing a disclosure document and renewal fee;
(B) interpretive opinion fee;
(C) acceptance of service of process pursuant to
subsection (b) of Section 5-145;
(D) issuance of certification pursuant to Section
5-20; or
(E) late registration fee pursuant to Section
5-30(g).
(2) The Secretary of State may, by rule or regulation,
raise or lower any fee imposed by, and which he or she is
authorized by law to collect under this Law.
(d) A registration automatically becomes effective upon
the expiration of the 10th full business day after a complete
filing, provided that no order has been issued or proceeding
pending under Section 5-45 of this Law. The Secretary of State
may by order waive or reduce the time period prior to
effectiveness, provided that a complete filing has been made.
The Secretary of State may by order defer the effective date
until the expiration of the 10th full business day after the
filing of any amendment.

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(e) The registration is effective for one year commencing
on the date of effectiveness and may be renewed annually upon
the filing of a current disclosure document accompanied by any
documents or information that the Secretary of State may by
rule or regulation or order require. The annual renewal fee
shall be in the same amount as the initial registration fee as
established under subsection (c) of Section 5-30 of this Law
which shall not be returnable in any event. Failure to renew
upon the close of the one year period of effectiveness will
result in expiration of the registration. The Secretary of
State may by rule or regulation or order require the filing of
a sales report.
(f) The Secretary of State may by rule or regulation or
order require the filing of all proposed literature or
advertising prior to its use.
(g) Notwithstanding the foregoing, applications for
renewal of registration of business opportunities may be filed
within 30 days following the expiration of the registration
provided that the applicant pays the annual registration fee
together with an additional amount equal to the annual
registration fee and files any other information or documents
that the Secretary of State may prescribe by rule or order. Any
application filed within 30 days following the expiration of
the registration shall be automatically effective as of the
time of the earlier expiration provided that the proper fee has
been paid to the Secretary of State.

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(Source: P.A. 92-308, eff. 1-1-02.)
(815 ILCS 602/5-35)
Sec. 5-35. Disclosure requirements.
(a) It shall be unlawful for any person to offer or, sell
any business opportunity required to be registered under this
Law unless a written disclosure document as filed under
subsection (a) of Section 5-30 of this Law is delivered to each
purchaser at least 14 10 business days prior to the execution
by a purchaser of any contract or agreement imposing a binding
legal obligation on the purchaser or the payment by a purchaser
of any consideration in connection with the offer or sale of
the business opportunity.
(b) The disclosure document shall have a cover sheet which
is entitled, in at least 10-point bold type, "DISCLOSURE
REQUIRED BY THE STATE OF ILLINOIS." Under the title shall
appear the statement in at least 10-point bold type that "THE
REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES NOT CONSTITUTE
APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE STATE OF
ILLINOIS. THE INFORMATION CONTAINED IN THIS DISCLOSURE
DOCUMENT HAS NOT BEEN VERIFIED BY THIS STATE. IF YOU HAVE ANY
QUESTIONS OR CONCERNS ABOUT THIS INVESTMENT, SEEK PROFESSIONAL
ADVICE BEFORE YOU SIGN A CONTRACT OR MAKE ANY PAYMENT. YOU ARE
TO BE PROVIDED 10 BUSINESS DAYS TO REVIEW THIS DOCUMENT BEFORE
SIGNING ANY CONTRACT OR AGREEMENT OR MAKING ANY PAYMENT TO THE
SELLER OR THE SELLER'S REPRESENTATIVE". The seller's name and

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principal business address, along with the date of the
disclosure document shall also be provided on the cover sheet.
No other information shall appear on the cover sheet. The
disclosure document shall contain the following information
unless the seller uses a disclosure document as provided in
paragraph (1) or (2) of subsection (a) of Section 5-30 of this
Law:
(1) The names and residential addresses of those
salespersons who will engage in the offer or sale of the
business opportunity in this State.
(2) The name of the seller, whether the seller is doing
business as an individual, partnership or corporation; the
names under which the seller has conducted, is conducting
or intends to conduct business; and the name of any parent
or affiliated company that will engage in business
transactions with purchasers or which will take
responsibility for statements made by the seller.
(3) The names, addresses and titles of the seller's
officers, directors, trustees, general managers, principal
executives, agents, and any other persons charged with
responsibility for the seller's business activities
relating to the sale of the business opportunity.
(4) Prior business experience of the seller relating to
business opportunities including:
(A) The name, address, and a description of any
business opportunity previously offered by the seller;

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(B) The length of time the seller has offered each
such business opportunity; and
(C) The length of time the seller has conducted the
business opportunity currently being offered to the
purchaser.
(5) With respect to persons identified in item (3) of
this subsection:
(A) A description of the persons' business
experience for the 10 year period preceding the filing
date of this disclosure document. The description of
business experience shall list principal occupations
and employers; and
(B) A listing of the persons' educational and
professional backgrounds including, the names of
schools attended and degrees received, and any other
information that will demonstrate sufficient knowledge
and experience to perform the services proposed.
(6) Whether the seller or any person identified in item
(3) of this subsection:
(A) Has been convicted of any felony, or pleaded
nolo contendere to a felony charge, or has been the
subject of any criminal, civil or administrative
proceedings alleging the violation of any business
opportunity law, securities law, commodities law,
franchise law, fraud or deceit, embezzlement,
fraudulent conversion, restraint of trade, unfair or

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deceptive practices, misappropriation of property or
comparable allegations;
(B) Has filed in bankruptcy, been adjudged
bankrupt, been reorganized due to insolvency, or was an
owner, principal officer or general partner or any
other person that has so filed or was so adjudged or
reorganized during or within the last 7 years.
(7) The name of the person identified in item (6) of
this subsection, nature of and parties to the action or
proceeding, court or other forum, date of the institution
of the action, docket references to the action, current
status of the action or proceeding, terms and conditions or
any order or decree, the penalties or damages assessed and
terms of settlement.
(8) The initial payment required, or when the exact
amount cannot be determined, a detailed estimate of the
amount of the initial payment to be made to the seller.
(9) A detailed description of the actual services the
seller agrees to perform for the purchaser.
(10) A detailed description of any training the seller
agrees to provide for the purchaser.
(11) A detailed description of services the seller
agrees to perform in connection with the placement of
equipment, products or supplies at a location, as well as
any agreement necessary in order to locate or operate
equipment, products or supplies on a premises neither owned

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nor leased by the purchaser or seller.
(12) A detailed description of any license or permit
that will be necessary in order for the purchaser to engage
in or operate the business opportunity.
(13) The business opportunity seller that is required
to secure a bond under Section 5-50 of this Law, shall
state in the disclosure document "As required by the State
of Illinois, the seller has secured a bond issued by
(insert name and address of surety company), a surety
company, authorized to do business in this State. Before
signing a contract or agreement to purchase this business
opportunity, you should check with the surety company to
determine the bond's current status.".
(14) Any representations made by the seller to the
purchaser concerning sales or earnings that may be made
from this business opportunity, including, but not limited
to:
(A) The bases or assumptions for any actual,
average, projected or forecasted sales, profits,
income or earnings;
(B) The total number of purchasers who, within a
period of 3 years of the date of the disclosure
document, purchased a business opportunity involving
the product, equipment, supplies or services being
offered to the purchaser; and
(C) The total number of purchasers who, within 3

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years of the date of the disclosure document, purchased
a business opportunity involving the product,
equipment, supplies or services being offered to the
purchaser who, to the seller's knowledge, have
actually received earnings in the amount or range
specified.
(15) Any seller who makes a guarantee to a purchaser
shall give a detailed description of the elements of the
guarantee. Such description shall include, but shall not be
limited to, the duration, terms, scope, conditions and
limitations of the guarantee.
(16) A statement of:
(A) The total number of business opportunities
that are the same or similar in nature to those that
have been sold or organized by the seller;
(B) The names and addresses of purchasers who have
requested a refund or rescission from the seller within
the last 12 months and the number of those who have
received the refund or rescission; and
(C) The total number of business opportunities the
seller intends to sell in this State within the next 12
months.
(17) A statement describing any contractual
restrictions, prohibitions or limitations on the
purchaser's conduct. Attach a copy of all business
opportunity and other contracts or agreements proposed for

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use or in use in this State including, without limitation,
all lease agreements, option agreements, and purchase
agreements.
(18) The rights and obligations of the seller and the
purchaser regarding termination of the business
opportunity contract or agreement.
(19) A statement accurately describing the grounds
upon which the purchaser may initiate legal action to
terminate the business opportunity contract or agreement.
(20) A copy of the most recent audited financial
statement of the seller, prepared within 13 months of the
first offer in this State, together with a statement of any
material changes in the financial condition of the seller
from that date. The Secretary of State may accept the
filing of a reviewed financial statement in lieu of an
audited financial statement.
(21) A list of the states in which this business
opportunity is registered.
(22) A list of the states in which this disclosure
document is on file.
(23) A list of the states which have denied, suspended
or revoked the registration of this business opportunity.
(24) A section entitled "Risk Factors" containing a
series of short concise statements summarizing the
principal factors which make this business opportunity a
high risk or one of a speculative nature. Each statement

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shall include a cross-reference to the page on which
further information regarding that risk factor can be found
in the disclosure document.
(25) Any additional information as the Secretary of
State may require by rule, regulation, or order.
(Source: P.A. 92-308, eff. 1-1-02.)
Section 20. The Franchise Disclosure Act of 1987 is amended
by changing Sections 3, 7, 8, 10, 11, 15, 16, 21, 22, 26, 29,
31, and 40 as follows:
(815 ILCS 705/3) (from Ch. 121 1/2, par. 1703)
Sec. 3. Definitions. As used in this Act:
(1) "Franchise" means a contract or agreement, either
expressed or implied, whether oral or written, between two or
more persons by which:
(a) a franchisee is granted the right to engage in the
business of offering, selling, or distributing goods or
services, under a marketing plan or system prescribed or
suggested in substantial part by a franchisor; and
(b) the operation of the franchisee's business
pursuant to such plan or system is substantially associated
with the franchisor's trademark, service mark, trade name,
logotype, advertising, or other commercial symbol
designating the franchisor or its affiliate; and
(c) the person granted the right to engage in such

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business is required to pay to the franchisor or an
affiliate of the franchisor, directly or indirectly, a
franchise fee of $500 or more;
Provided that this Act shall not apply to any of the
following persons, entities or relationships which may involve
or acquire a franchise or any interest in a franchise:
(i) any franchised business which is operated by
the franchisee on the premises of the franchisor or
subfranchisor as long as such franchised business is
incidental to the business conducted by the franchisor
or subfranchisor at such premises, including, without
limitation, leased departments and concessions; or
(ii) a fractional franchise. A "fractional
franchise" means any relationship in which the person
described therein as a franchisee, or any of the
current directors or executive officers thereof, has
been in the type of business represented by the
franchise relationship for more than 2 years and the
parties anticipated, or should have anticipated, at
the time the agreement establishing the franchise
relationship was reached, that the sales arising from
the relationship would represent no more than 20% of
the sales in dollar volume of the franchisee for a
period of at least one year after the franchisee begins
selling the goods or services involved in the
franchise; or

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(iii) a franchise agreement for the use of a
trademark, service mark, trade name, logotype,
advertising, or other commercial symbol designating a
person who offers on a general basis, for a fee or
otherwise, a bona fide service for the evaluation,
testing, or certification of goods, commodities, or
services; or .
(iv) a franchise relationship covered by the
Petroleum Marketing Practices Act, 15 U.S.C. 2801.
(2) "Franchisee" means a person to whom a franchise is
granted and includes, unless stated otherwise in this Act: (a)
a subfranchisor with regard to its relationship with a
franchisor and (b) a subfranchisee with regard to its
relationship with a subfranchisor.
(3) "Franchisor" means a person who grants a franchise and
includes a subfranchisor with regard to its relationship with a
franchisee, unless stated otherwise in this Act.
(4) "Subfranchise" means any contract or agreement between
a franchisor and a subfranchisor whereby the subfranchisor is
granted the right, in consideration of the payment of a
franchise fee in whole or in part for such right, to service
franchises or to sell or negotiate the sale of franchises.
Where used in this Act, unless specifically stated otherwise,
"franchise" includes "subfranchise."
(5) "Subfranchisor" means a person to whom the right to
sell or negotiate the sale of subfranchises is granted.

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(6) "Order" means a consent, authorization, approval,
prohibition, or requirement applicable to a specific case
issued by the Attorney General Administrator.
(7) "Person" means an individual, a corporation, a
partnership, a joint venture, an association, a joint stock
company, a trust, or an unincorporated organization.
(8) "Rule" means any published regulation or standard of
general application issued by the Administrator.
(9) "Sale" or "sell" includes every contract or agreement
of sale of, contract to sell, or disposition of, a franchise or
interest in a franchise for value.
(10) "State" means the State of Illinois.
(11) "Fraud" and "deceit" are not limited to common law
fraud or deceit.
(12) "Offer" or "offer to sell" includes every attempt to
offer to dispose of, or solicitation of an offer to buy, a
franchise, any interest in a franchise or an option to acquire
a franchise for value.
(13) "Publish" means publicly to issue or circulate by
newspaper, mail, radio, or television, or otherwise to
disseminate to the public.
(14) "Franchise fee" means any fee or charge that a
franchisee is required to pay directly or indirectly for the
right to enter into a business or sell, resell, or distribute
goods, services or franchises under an agreement, including,
but not limited to, any such payment for goods or services,

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provided that the Administrator may by rule define what
constitutes an indirect franchise fee, and provided further
that the following shall not be considered the payment of a
franchise fee: (a) the payment of a reasonable service charge
to the issuer of a credit card by an establishment accepting or
honoring such credit card; (b) amounts paid to a trading stamp
company by a person issuing trading stamps in connection with
the retail sale of merchandise or services; (c) the purchase or
agreement to purchase goods for which there is an established
market at a bona fide wholesale price; (d) the payment for
fixtures necessary to operate the business; (e) the payment of
rent which reflects payment for the economic value of the
property; or (f) the purchase or agreement to purchase goods
for which there is an established market at a bona fide retail
price subject to a bona fide commission or compensation plan.
The Administrator may by rule define what shall constitute an
established market.
(15) "Disclosure statement" means the document provided
for in Section 16 of this Act and all amendments to such
document.
(16) "Write" or "written" shall include printed,
lithographed or any other means of graphic communication.
(17) (Blank).
(18) "Marketing plan or system" means a plan or system
relating to some aspect of the conduct of a party to a contract
in conducting business, including but not limited to (a)

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specification of price, or special pricing systems or discount
plans, (b) use of particular sales or display equipment or
merchandising devices, (c) use of specific sales techniques,
(d) use of advertising or promotional materials or cooperation
in advertising efforts; provided that an agreement is not a
marketing plan or system solely because a manufacturer or
distributor of goods reserves the right to occasionally require
sale at a special reduced price which is advertised on the
container or packaging material in which the product is
regularly sold, if the reduced price is absorbed by the
manufacturer or distributor.
(19) "Administrator" means the Illinois Attorney General.
(20) (a) An offer to sell a franchise 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.
(b) An offer to sell a franchise is not made in this
State merely because the franchisor circulates or there is
circulated in this State an advertisement in (i) a bona
fide newspaper or other publication of general, regular and

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paid circulation which has had more than 2/3 of its
circulation outside this State during the past 12 months,
or (ii) a radio or television program originating outside
this State which is received in this State.
(21) "Franchise broker" means any person engaged in the
business of representing a franchisor in offering for sale or
selling a franchise and is not a franchisor, an affiliate of a
franchisor or an officer, director or employee of a franchisor
or an affiliate of a franchisor with respect to such franchise.
A franchisee shall not be a franchise broker merely because it
receives a payment from the franchisor in consideration of the
referral of a prospective franchisee to the franchisor, if the
franchisee does not otherwise participate in the sale of a
franchise to the prospective franchisee. A franchisee shall not
be deemed to participate in a sale merely because he responds
to an inquiry from a prospective franchisee.
(22) "Salesperson" means any person employed by or
representing a franchise broker, a franchisor or an affiliate
of the franchisor in effecting or attempting to effect the
offer or sale of a franchise.
(Source: P.A. 90-642, eff. 7-24-98.)
(815 ILCS 705/7) (from Ch. 121 1/2, par. 1707)
Sec. 7. Sale by franchisee and extension or renewal of
existing franchise. There shall be exempted from the provisions
of Sections 5, 10, 11, 13 and 15 of this Act the offer or sale

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of a franchise by a franchisee for its own account if the sale
is not effected by or through a franchisor. A sale is not
effected by or through a franchisor merely because a franchisor
has a right to approve or disapprove a different franchisee or
requires payment of a reasonable transfer fee or requires the
new franchisee to execute a franchise agreement on terms not
materially different from the existing franchise agreement.
There shall be exempted from the provisions of Sections 5,
10, 11, 13 and 15 of this Act the extension or renewal of an
existing franchise or the exchange or substitution of a
modified or amended franchise agreement where there is no
interruption in the operation of the franchise business by the
franchisee.
(Source: P.A. 85-551.)
(815 ILCS 705/8) (from Ch. 121 1/2, par. 1708)
Sec. 8. Exemptions.
(a) There shall be exempted, from the registration
requirements of Section 10 of this Act, the offer and sale of a
franchise if:
(1) the franchisor has a net worth on a consolidated
basis, according to its most recent audited financial
statement, of not less than $15,000,000; or the franchisor
has a net worth, according to its most recent unaudited
financial statement, of not less than $1,000,000 and is at
least 80% owned by a corporation which has a net worth on a

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consolidated basis, according to its most recent audited
financial statement, of not less than $15,000,000;
(2) the franchisee (or its parent or any affiliates) is
an entity that has been in business for at least 5 years
and has a net worth of at least $5,000,000; or
(3) one or more purchasers of at least 50% ownership
interest in the franchise within 60 days of the sale, has
been, for at least 2 years, an officer, director, general
partner, individual with management responsibility for the
offer and sale of the franchisor's franchises or the
administrator of the franchised network; or within 60 days
of the sale, has been, for at least 2 years, an owner of at
least a 25% interest in the franchisor.
Provided, unless exempted by order or rule of the
Administrator, the franchisor shall deliver to the prospective
franchisee a disclosure statement in accordance with the
requirements of Section 5(2) of this Act in connection with any
transaction exempted under this Section 8(a).
(b) There shall be exempted from the provisions of Sections
5, 10, 11, 13 and 15 of this Act the offer and sale of a
franchise if the prospective franchisee qualifies as one of the
following:
any bank as defined in Section 3(a)(2) of the Securities
Act of 1933 whether acting in its individual or fiduciary
capacity or as an insurance company as defined in Section 2(13)
of that Act.

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(Source: P.A. 85-551.)
(815 ILCS 705/10) (from Ch. 121 1/2, par. 1710)
Sec. 10. Registration and Annual Report. No franchisor may
sell or offer to sell a franchise in this State if (1) the
franchisee is domiciled in this State or (2) the offer of the
franchise is made or accepted in this State and the franchise
business is or will be located in this State, unless the
franchisor has registered the franchise with the Administrator
by filing such form of notification and disclosure statement as
required under Section 16.
The registration of a franchise shall become effective on
the 21st day after the date of the filing of the required
materials, unless the Administrator has denied registration
under subdivision (a)(3) of Section 22.
The registration of a franchise shall expire 120 days after
the franchisor's fiscal year end. Annually, but not later than
one business day before the anniversary date of the
registration expires, the franchisor shall file the disclosure
statement updated as of the date of the franchisor's prior
fiscal year end a date within 120 days of the anniversary date
of the registration.
(Source: P.A. 90-642, eff. 7-24-98.)
(815 ILCS 705/11) (from Ch. 121 1/2, par. 1711)
Sec. 11. Amendments. Within 30 days after the close of each

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quarter of its fiscal year, the franchisor shall prepare
revisions to its disclosure statement to reflect any material
changes to disclosures included, or required to be included, in
the 90 days of the occurrence of any material change in any
facts required to be disclosed, a franchisor whose franchise is
registered under this Act shall amend its disclosure statement.
The franchisor and shall deliver the amended disclosure
statement in accordance with the requirements of subsection (2)
of Section 5 and Section 16 of this Act to any prospective
franchisee, including prospective franchisees to whom a
disclosure statement was previously delivered if the material
change relates to or affects the franchisor or the franchise
offered to such prospective franchisees. The amended
disclosure statement shall be filed with the Administrator. An
amendment shall not be required if the terms of the franchise
agreement merely reflect changes from the franchisor's
registered franchise made pursuant to negotiations between the
franchisee and the franchisor.
The fact that the franchise is considered to be registered
is not a finding that the amended disclosure statement complies
with the standard of disclosure required by this Act.
(Source: P.A. 90-642, eff. 7-24-98.)
(815 ILCS 705/15) (from Ch. 121 1/2, par. 1715)
Sec. 15. Escrow of franchise fees; surety bonds; franchise
fee deferrals. If the Administrator finds that a franchisor has

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failed to demonstrate that adequate financial arrangements
have been made to fulfill obligations to provide real estate,
improvements, equipment, inventory, training, or other items
to be included in the establishment and opening of the
franchise business being offered, the Administrator may by rule
or order require the escrow or impoundment of franchise fees
and other funds paid by the franchisee until such obligations
have been fulfilled, or, at the option of the franchisor, the
furnishing of a surety bond as provided by rule of the
Administrator, if he finds that such requirement is necessary
and appropriate to protect prospective franchisees, or, at the
option of the franchisor, the deferral of payment of the
initial fee until the opening of the franchise business.
(Source: P.A. 85-551.)
(815 ILCS 705/16) (from Ch. 121 1/2, par. 1716)
Sec. 16. Form and contents of disclosure statements. The
disclosure statement required under this Act shall be prepared
in accordance with the Federal Trade Commission rule entitled
Disclosure Requirements and Prohibitions Concerning
Franchising, 16 C.F.R. Part 436, as it may be Uniform Franchise
Offering Circular Guidelines as adopted and amended, the
Guidelines promulgated by the North American Securities
Administrators Association, Inc., as they may be amended, and
the rules adopted by the Administrator pursuant to Section 32
of this Act. Incorporated.

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All statements in the disclosure statement shall be free
from any false or misleading statement of a material fact,
shall not omit to state any material fact required to be stated
or necessary to make the statements not misleading, and shall
be accurate and complete as of the effective date thereof.
(Source: P.A. 90-642, eff. 7-24-98.)
(815 ILCS 705/21) (from Ch. 121 1/2, par. 1721)
Sec. 21. Franchise Advisory Board. There is created in the
Office of the Administrator a Franchise Advisory Board. The
Franchise Advisory Board shall consist of such members as the
Administrator deems appropriate to advise him on franchising
and franchise related matters. The members shall be persons who
have knowledge and experience in franchising. The members of
the Franchise Advisory Board shall serve at the pleasure of the
Administrator. The Franchise Advisory Board from time to time
shall make recommendations concerning the administration and
enforcement of this Act. Members of the Franchise Advisory
Board shall serve without compensation but shall be reimbursed
for actual and necessary expenses incurred in their official
capacities. The Board shall select its own chairman, establish
rules and procedures, and keep a record of matters transpiring
at all meetings.
(Source: P.A. 85-551.)
(815 ILCS 705/22) (from Ch. 121 1/2, par. 1722)

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Sec. 22. Enforcement.
(a) The Administrator may suspend, terminate, prohibit or
deny the sale of any franchise or registration of any
franchise, or franchise broker or salesperson if it appears to
him that: (1) there has been a failure to comply with any of
the provisions of this Act or the rules or orders of the
Administrator pertaining thereto; or (2) that the disclosure
statement or any amendment thereto includes any false or
misleading statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading; or (3) that the
disclosure statement filed in conjunction with an initial
registration under Section 10 is materially deficient. A
disclosure statement is "materially deficient" if it fails to
comply with the requirements of the Uniform Franchise Offering
Circular Guidelines referred to in Section 16; or (4) that the
sale of the franchise would constitute a misrepresentation,
deceit or fraud upon prospective franchisees; or (5) that any
person in this State is engaging in or about to engage in
false, fraudulent or deceptive practices or any device, scheme,
or artifice to defraud in connection with the offer or sale of
the franchise; or (6) that any person identified in the
disclosure statement or any person engaged in the offer or sale
of the franchise in this State has been convicted of an
offense, is subject to an order or civil judgment or is a
defendant in a proceeding required to be described in the

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disclosure statement and the involvement of such person creates
an unreasonable risk to prospective franchisees; or (7)
(blank); or (8) (blank); or (9) that the franchisor's
enterprise or method of business includes or would include
activities which are illegal where performed; or (10) (blank);
or (11) (blank).
In no case shall the Administrator, or any person
designated by him, in the administration of this Act, incur any
official or personal liability by issuing an order or other
proceeding or by suspending, denying, prohibiting or
terminating the registration of a franchise broker or
salesperson, or by denying, suspending, terminating or
prohibiting the registration of franchises, or prohibiting the
sale of franchises, or by suspending or prohibiting any person
from acting as a franchise broker or salesperson.
The Administrator may exercise any of the powers specified
in Section 31 of this Act.
(b) The Administrator, with such assistance as he may from
time to time request of the state's attorneys in the several
counties, may institute proceedings in the circuit court to
prevent and restrain violations of this Act or of any rule or
order prescribed or issued under this Act. In such a
proceeding, the court shall determine whether a violation has
been committed, and shall enter such judgment or decree as it
considers necessary to remove the effects of any violation and
to prevent such violation from continuing or from being renewed

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in the future. The court, in its discretion, may exercise all
powers necessary for this purpose, including, but not limited
to, injunction, revocation, forfeiture or suspension of the
charter, franchise, certificate of authority or privileges of
any corporation, association, limited partnership or other
business organization operating under the laws of this State,
dissolution of domestic corporations or associations,
suspension or termination of the right of foreign corporations
or associations to do business in this State, or restitution or
payment of damages by a franchisor to persons injured by
violations of this Act, including without limitation an award
of reasonable attorneys fees and costs.
(Source: P.A. 90-642, eff. 7-24-98.)
(815 ILCS 705/26) (from Ch. 121 1/2, par. 1726)
Sec. 26. Private civil actions. Any person who offers,
sells, terminates, or fails to renew a franchise in violation
of this Act shall be liable to the franchisee who may sue for
damages caused thereby. This amendatory Act of 1992 is intended
to clarify the existence of a private right of action under
existing law with respect to the termination or nonrenewal of a
franchise in violation of this Act. In the case of a violation
of Section 5, 6, 10, 11, or 15 of the Act, the franchisee may
also sue for rescission.
No franchisee may sue for rescission under this Section 26
who shall fail, within 30 days from the date of receipt

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thereof, to accept an offer to return the consideration paid or
to repurchase the franchise purchased by such person. Every
offer provided for in this Section shall be in writing, shall
be delivered to the franchisee or sent by certified mail
addressed to the franchisee at such person's last known
address, shall offer to return any consideration paid or to
repurchase the franchise for a price equal to the full amount
paid less any net income received by the franchisee, plus the
legal rate of interest thereon, and may require the franchisee
to return to the person making such offer all unsold goods,
equipment, fixtures, leases and similar items received from
such person. Such offer shall continue in force for 30 days
from the date on which it was received by the franchisee and
shall advise the franchisee of such rights and the period of
time limited for acceptance thereof. Any agreement not to
accept or refusing or waiving any such offer made during or
prior to the expiration of said 30 days shall be void.
The term "franchisee" as used in this Section shall include
the personal representative or representatives of the
franchisee.
Every person who directly or indirectly controls a person
liable under this Section 26, every partner in a firm so
liable, every principal executive officer or director of a
corporation so liable, every manager of a limited liability
company so liable, every person occupying a similar status or
performing similar functions, and every employee of a person so

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liable, who materially aids in the act or transaction
constituting the violation, is also liable jointly and
severally with and to the same extent as such person, unless
said person who otherwise is liable had no knowledge or
reasonable basis to have knowledge of the facts, acts or
transactions constituting the alleged violation.
Every franchisee in whose favor judgment is entered in an
action brought under this Section shall be entitled to the
costs of the action including, without limitation, reasonable
attorney's fees.
(Source: P.A. 87-1143.)
(815 ILCS 705/29) (from Ch. 121 1/2, par. 1729)
Sec. 29. Certificate of registration or filing of annual
report; admissibility in evidence. In any civil or criminal
action brought under this Act, a Certificate under the seal of
this State, signed by the Administrator, stating whether or not
a franchise is registered, or whether or not an annual report
of a franchisor has been filed under Section 10 of this Act, or
whether or not a person has registered as a franchise broker
under Section 13 of this Act, shall constitute prima facie
evidence of such matter, and shall be admissible into evidence
at trial without proof of foundation or additional
authenticity.
(Source: P.A. 85-551.)

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(815 ILCS 705/31) (from Ch. 121 1/2, par. 1731)
Sec. 31. Powers of the Administrator. (a) Investigations.
The Administrator may in his discretion: (1) make such public
or private investigations inside or outside this State as he
deems necessary (i) to determine whether any person has
violated, is violating, or is about to violate any provision of
this Act or any rule or order prescribed or issued under this
Act or (ii) to aid in the enforcement of this Act or in the
prescribing of rules under this Act; and (2) publish
information concerning the violation of this Act or any rule or
order prescribed or issued under this Act. No actions taken or
orders issued by the Administrator shall be binding on, nor in
any way preclude the Administrator from conducting any
investigation or commencing any action authorized under this
Act. The Administrator or any of his assistants may participate
in any hearings conducted by the Administrator under this Act
and the Administrator may provide such assistance as the
Administrator believes necessary to effectively fulfill the
purposes of this Act.
(b) Subpoenas. For the purpose of any investigation or
proceeding under this Act and prior to the commencement of any
civil or criminal action as provided for in this Act, the
Administrator has the authority to subpoena witnesses, compel
their attendance, examine them under oath, or require the
production of any books, documents, records or tangible things,
hereafter referred to as "documentary material", which the

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Administrator deems relevant or material to his investigation,
for inspection, reproducing or copying under such terms and
conditions as are hereafter set forth. Any subpoena issued by
the Administrator shall contain the following information: (1)
the statute and section thereof, the alleged violation of which
is under investigation; (2) the date, place and time at which
the person is required to appear or produce documentary
material in his possession, custody or control at a designated
office of the Administrator, which date shall not be less than
10 days from date of service of the subpoena; and (3) where
documentary material is required to be produced, the same shall
be prescribed by class so as to clearly indicate the material
demanded.
(c) Production of documentary material. The Administrator
is hereby authorized, and may so elect to require the
production, pursuant to this Section of documentary material
prior to the taking of any testimony of the person subpoenaed,
in which event such documentary material shall be made
available for inspection and copying during normal business
hours at the principal place of business of the person served,
or at such other time and place as may be agreed upon by the
person served and the Administrator. When documentary material
is demanded by subpoena, said subpoena shall not (1) contain
any requirement which would be unreasonable or improper if
contained in a subpoena duces tecum issued by a court of this
State; or (2) require the disclosure of any documentary

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material which would be privileged, or which for any other
reason would not be required by a subpoena duces tecum issued
by a court of this State.
(d) Service of subpoenas. Service of a subpoena of the
Administrator as provided herein may be made by (1) delivery of
a duly executed copy thereof to the person served or if a
person is not a natural person, to the principal place of
business of the person to be served, or (2) mailing by
certified mail, return receipt requested, a duly executed copy
thereof addressed to the person to be served at his principal
place of business in this State, or, if said person has no
place of business in this State, to his principal office.
(e) Examination of witnesses. The examination of all
witnesses under this Section shall be conducted by the
Administrator, or by his deputy designated by him, before an
officer authorized to administer oaths in this State. The
testimony shall be taken stenographically or by a sound
recording device and shall be transcribed.
(f) Fees. All persons served with a subpoena by the
Administrator under this Act shall be paid the same fees and
mileage as are paid to witnesses in the courts of this State.
(g) Judicial enforcement of subpoenas. In the event a
witness served with a subpoena by the Administrator under this
Act fails or refuses to obey same or to produce documentary
material as provided herein or to give testimony relevant or
material to the investigation being conducted, the

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Administrator may petition any circuit court for an order
requiring said witness to attend and testify or produce the
documentary material demanded. Thereafter, any failure or
refusal on the part of the witness to obey such order of court
may be punishable by the court as a contempt thereof.
(h) Immunity from prosecution. No person is excused from
attending and testifying or from producing any document or
records before the Administrator in obedience to the subpoena
of the Administrator, in any proceeding instituted by the
Administrator and authorized by this Act, on the ground that
the testimony or evidence, documentary or otherwise, required
of him may tend to incriminate him or subject him to a penalty
or forfeiture. No individual may be prosecuted or subjected to
any penalty or forfeiture for or on account of any transaction,
matter, or thing concerning which he is compelled, after
validly claiming his privilege against self-incrimination, to
testify or produce evidence, documentary or otherwise, except
that the individual testifying is not exempt from prosecution
and punishment for perjury or contempt committed in testifying.
(i) Administrator entitled to recover costs. In any action
brought under the provisions of this Act, the Administrator is
entitled to recover costs for the use of this State.
(j) In the administration of this Act, the Attorney General
may accept an Assurance of Voluntary Compliance with respect to
any method, act, or practice deemed to be violative of the Act
from any person who has engaged in, is engaging in, or was

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about to engage in such method, act, or practice. Evidence of a
violation of an Assurance of Voluntary Compliance shall be
prima facie evidence of a violation of this Act in any
subsequent proceeding brought by the Attorney General against
the alleged violator. The Administrator may require that an
Assurance of Voluntary Compliance be disclosed in the
disclosure statement.
(Source: P.A. 85-551.)
(815 ILCS 705/40) (from Ch. 121 1/2, par. 1740)
Sec. 40. Fees.
(a) The Administrator shall charge and collect the fees
fixed by this Section, or as prescribed by rule of the
Administrator. All fees and charges collected under this
Section shall be transmitted to the State Treasurer at least
weekly, accompanied by a detailed statement thereof. Such fees
and charges shall be refundable at the discretion of the
Administrator.
(b) The fee for the initial registration of a franchise
shall be $500.
(c) The fee for filing an amended disclosure statement
shall be $100 if the amendment pertains to a material change,
otherwise $25.
(d) The fee for an interpretive opinion shall be $50.
(e) The fee for filing an initial large franchisor
exemption under Section 200.202 of Title 14 of the Illinois

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Administrative Code shall be $500 and the fee for renewals of
this exemption shall be $100 registration of a franchise broker
shall be $100 with a renewal fee of $100.
(f) The fee for filing an annual report shall be $100.
(Source: P.A. 85-551.)
(815 ILCS 705/13 rep.)
Section 25. The Franchise Disclosure Act of 1987 is
amended by repealing Section 13.
Section 99. Effective date. This Act takes effect October