PROVINCE OF NEW BRUNSWICK ISSUES CONSULTATION PAPER ON ITS PROPOSED REGULATIONS UNDER THE FRANCHISES ACT

The Province of New Brunswick released its Consultation Paper on its proposed Regulations to be brought into force in New Brunswick when it brings its Franchises Act into force.

The Consultation Paper is available for review on the website of the New Brunswick Justice and Consumer Affairs Department at www.gnb.ca/oo62/promos/comments-e.asp.

Comments are encouraged, by the deadline of June 12, 2009.

After the consultation period closes, the final regulations will be published, and the Act and Regulations are expected to come into force three to six months following that publication.

In brief, New Brunswick proposes to follow quite closely the similar Regulations already in force in the Province of Prince Edward Island, although some additional guidance will be drawn from the Uniform Law Conference of Canada (ULCC) Uniform Regulations which were published in 2005 to accompany the ULCC's Uniform Franchises Act. The ULCC Uniform Regulations can be viewed at www.ulcc.ca/en/us/UFA_Disclosure_Documents_Reg_EN.pdf.

Although the New Brunswick proposal is to follow Prince Edward Island, with some additional guidance from ULCC, some variations are also proposed for the New Brunswick Regulations.

• "wraparound" documents permitted
  
  
• electronic documents permitted
  
  
• the Alberta and Prince Edward Island provision allowing for a disclosure document to be properly given if it is "substantially complete", will not be adopted
  
  
• the Ontario approach of simply providing that a franchisor provide a prospective franchisee with "a disclosure document" is proposed, but without any specific "form" or "format" requirements for the disclosure document
  
  
• a "mature franchisor" partial exemption to financial disclosures is proposed, which would provide franchisors with the option of disclosing either its financial statements, or an auditor's certificate that the mature franchisor meets the criteria in the Regulations for the mature franchisor exemption. The New Brunswick mature franchisor exemption criteria will differ slightly from those already in place in Ontario and Prince Edward Island
  
  
• New Brunswick's proposed requirements for disclosure of the licences and registrations that the franchisee will need to operate the business, will be confined to federal and provincial licences and registrations that are specific to the particular franchised business being offered
  
  
• some additional or different disclosure items are proposed:
  
  
  • a summary of the material topics covered by the franchisor's manuals
    
    
  • negative disclosure statements are to be included where the franchisor does not provide an estimate of operating costs, or training
    
    
  • disclosure if the franchisor has the unilateral right to change the purchase or sale (transfer) restrictions imposed on franchisees
    
    
  • disclosure of any known material impediments to the use of the franchisor's trademarks, or infringements of them
    
    
  • disclosure if the franchisor retains the right to offer the same goods or services as the franchisee in its area through Internet or telephone sales
    
    
  • disclosure if the franchisor operates other businesses of the same type as the franchise, or if they distribute goods or services similar to the franchise, in the intended market, whether or not the same trademark is involved
    
    
  • disclosure of the businesses that the franchisor or its affiliates or associates operate themselves in the same area under the same trademark as the franchise
    
    
  • disclosure of former franchisees will not require a statement of the reasons for the closure
    
    
  • New Brunswick's forms of director/officer certificates to be attached to the disclosure document will include statements of the definitions of material fact, or material change.

The second portion of the proposed Regulations discussed in the Consultation Paper, deal with mediation, because the New Brunswick Franchises Act creates a dispute resolution procedure under which any party to a franchise agreement can seek mediation of a dispute. The proposal adopts, but only in part, the mediation regulations adopted by the ULCC. New Brunswick's proposals appear to simplify from those adopted by the ULCC.