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Public Act 096-0648
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| SB1285 Enrolled |
LRB096 03127 KTG 13143 b |
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AN ACT concerning business.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The General Not For Profit Corporation Act of |
1986 is amended by changing Section 107.50 as follows:
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(805 ILCS 105/107.50) (from Ch. 32, par. 107.50)
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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.
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(Source: P.A. 84-1423.)
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Section 10. The Illinois Business Brokers Act of 1995 is |
amended by changing Section 10-80 as follows:
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(815 ILCS 307/10-80)
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Sec. 10-80.
Persons exempt from registration and other
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duties under law; burden of proof thereof.
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(a) The following persons are exempt from the
requirements |
of this Act:
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(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
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incidental to the attorney's practice.
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(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
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incidental basis, acts as a business broker.
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(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,
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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.
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(4) An associated person described in subdivision |
(h)(2) of Section 15
of the Federal 1934 Act.
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(5) An investment adviser registered pursuant to |
Section 203 of the
Federal 1940 Investment Advisors Act.
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(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.
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(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
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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
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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;
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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.
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(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
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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.
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(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.
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(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.
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(c) The burden of proof of any exemption or
classification |
provided in this Act shall be on the party
claiming the |
exemption or classification.
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(Source: P.A. 90-70, eff. 7-8-97; 91-245, eff. 12-31-99.)
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Section 15. The Business Opportunity Sales Law of 1995 is |
amended by changing Sections 5-10, 5-30 and 5-35 as follows:
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(815 ILCS 602/5-10)
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Sec. 5-10. Exemptions. Registration pursuant to Section |
5-30
shall not apply to any of the
following:
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(a) Any offer or sale of a business opportunity for which
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the immediate cash payment made by the purchaser for any
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business opportunity is at least $25,000 if the immediate cash
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payment does not exceed 20% of the purchaser's net worth as
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determined exclusive of principal residence, furnishings
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therein, and automobiles; provided, however, the Secretary of
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State may by rule or regulation withdraw or further condition
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the availability of this exemption.
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(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.
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(c) Any offer or sale of a business opportunity where the
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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.
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(d) Any offer or sale of a business opportunity where the
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purchaser has a net worth of not less than $250,000. Net worth
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shall be determined exclusive of principal residence,
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furnishings therein, and automobiles. The Secretary of State |
may
by rule or regulation withdraw or further condition the
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availability of this exemption.
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(e) Any offer or sale of a business opportunity where the
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purchaser is a bank, savings and loan association, trust
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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.
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(f) Any offer or sale of a business opportunity which is
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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:
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(1) The Franchise Offering Circular provided for under
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the Franchise Disclosure Act of 1987 which the Secretary of |
State may
adopt by rule or regulation; or
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(2) A disclosure document prepared pursuant to the
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Federal Trade Commission rule entitled Disclosure
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Requirements and Prohibitions Concerning Franchising and
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Business Opportunity Ventures, 16 C.F.R. Sec. 436 (1979).
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For the purposes of this subsection, a personal meeting
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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.
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(g) Any offer or sale of a business opportunity for which
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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.
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(h) Any offer or sale of a business opportunity which the
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Secretary of State exempts by order or a class of business
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opportunities which the Secretary of State exempts by rule or
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regulation upon the finding that such exemption would not be
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contrary to public interest and that registration would not be
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necessary or appropriate for the protection of purchasers.
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(Source: P.A. 91-809, eff. 1-1-01.)
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(815 ILCS 602/5-30)
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Sec. 5-30. Registration.
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(a) In order to register a business opportunity, the seller
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shall file with the Secretary of State one of the following
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disclosure documents with the appropriate cover sheet as
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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:
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(1) The Business Opportunity Disclosure Document |
Franchise Offering Circular which the
Secretary of State |
may prescribe by rule or regulation; or
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(2) A disclosure document prepared pursuant to the
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Federal Trade Commission rule entitled Disclosure
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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
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(3) A disclosure document prepared pursuant to |
subsection (b) of Section
5-35 of this Law.
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(b) Every seller shall file, in the form as the Secretary
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of State may prescribe, an irrevocable consent appointing the
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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.
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(c)(1) The Secretary of State shall by rule or regulation
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impose and shall collect fees necessary for the |
administration
of this Law including, but not limited to, |
fees for the
following purposes:
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(A) filing a disclosure document and renewal fee;
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(B) interpretive opinion fee;
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(C) acceptance of service of process pursuant to |
subsection (b) of
Section 5-145;
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(D) issuance of certification pursuant to Section |
5-20; or
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(E) late registration fee pursuant to Section |
5-30(g).
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(2) The Secretary of State may, by rule or regulation,
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raise or lower any fee imposed by, and which he or she is
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authorized by law to collect under this Law.
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(d) A registration automatically becomes effective upon
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the expiration of the 10th full business day after a complete
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filing, provided that no order has been issued or proceeding
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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
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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
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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.
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(f) The Secretary of State may by rule or regulation or
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order require the filing of all proposed literature or
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advertising prior to its use.
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(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
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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.)
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(815 ILCS 602/5-35)
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Sec. 5-35. Disclosure requirements.
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(a) It shall be unlawful for any person to offer or, sell
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any business opportunity required to be registered under this
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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.
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(b) The disclosure document shall have a cover sheet which
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is entitled, in at least 10-point bold type, "DISCLOSURE
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REQUIRED BY THE STATE OF ILLINOIS." Under the title shall |
appear
the statement in at least 10-point bold type that "THE
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REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES NOT CONSTITUTE
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APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE STATE OF
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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:
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(1) The names and residential addresses of those
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salespersons who will engage in the offer or sale of the
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business opportunity in this State.
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(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
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responsibility for statements made by the seller.
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(3) The names, addresses and titles of the seller's
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officers, directors, trustees, general managers, principal
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executives, agents, and any other persons charged with
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responsibility for the seller's business activities |
relating
to the sale of the business opportunity.
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(4) Prior business experience of the seller relating
to |
business opportunities including:
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(A) The name, address, and a description of any
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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
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(C) The length of time the seller has conducted
the |
business opportunity currently being offered to the
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purchaser.
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(5) With respect to persons identified in item (3) of |
this subsection:
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(A) A description of the persons' business
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experience for the 10 year period preceding the filing
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date of this disclosure document. The description of
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business experience shall list principal occupations
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and employers; and
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(B) A listing of the persons' educational and
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professional backgrounds including, the names of
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schools attended and degrees received, and any other
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information that will demonstrate sufficient knowledge
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and experience to perform the services proposed.
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(6) Whether the seller or any person identified in
item |
(3) of this subsection:
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(A) Has been convicted of any felony, or pleaded
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nolo contendere to a felony charge, or has been the
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subject of any criminal, civil or administrative
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proceedings alleging the violation of any business
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opportunity law, securities law, commodities law,
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franchise law, fraud or deceit, embezzlement,
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fraudulent conversion, restraint of trade, unfair or
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deceptive practices, misappropriation of property or
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comparable allegations;
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(B) Has filed in bankruptcy, been adjudged
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bankrupt, been reorganized due to insolvency, or was an
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owner, principal officer or general partner or any
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other person that has so filed or was so adjudged or
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reorganized during or within the last 7 years.
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(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.
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(8) The initial payment required, or when the exact
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amount cannot be determined, a detailed estimate of the
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amount of the initial payment to be made to the seller.
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(9) A detailed description of the actual services the
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seller agrees to perform for the purchaser.
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(10) A detailed description of any training the seller
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agrees to provide for the purchaser.
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(11) A detailed description of services the seller
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agrees to perform in connection with the placement of
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equipment, products or supplies at a location, as well as
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any agreement necessary in order to locate or operate
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equipment, products or supplies on a premises neither owned
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nor leased by the purchaser or seller.
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(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.
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(13) The business opportunity seller that is required
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to secure a bond under Section 5-50 of this Law, shall
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state in the disclosure document "As required by the State
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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.".
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(14) Any representations made by the seller to the
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purchaser concerning sales or earnings that may be made |
from
this business opportunity, including, but not limited |
to:
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(A) The bases or assumptions for any actual,
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average, projected or forecasted sales, profits, |
income
or earnings;
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(B) The total number of purchasers who, within a
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period of 3 years of the date of the disclosure
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document, purchased a business opportunity involving
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the product, equipment, supplies or services being
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offered to the purchaser; and
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(C) The total number of purchasers who, within 3
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years of the date of the disclosure document, purchased
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a business opportunity involving the product,
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equipment, supplies or services being offered to the
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purchaser who, to the seller's knowledge, have |
actually
received earnings in the amount or range |
specified.
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(15) Any seller who makes a guarantee to a purchaser
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shall give a detailed description of the elements of the
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guarantee. Such description shall include, but shall not be
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limited to, the duration, terms, scope, conditions and
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limitations of the guarantee.
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(16) A statement of:
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(A) The total number of business opportunities
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that are the same or similar in nature to those that
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have been sold or organized by the seller;
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(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
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(C) The total number of business opportunities
the |
seller intends to sell in this State within the
next 12 |
months.
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(17) A statement describing any contractual
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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.
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(18) The rights and obligations of the seller and the
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purchaser regarding termination of the business |
opportunity
contract or agreement.
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(19) A statement accurately describing the grounds |
upon
which the purchaser may initiate legal action to |
terminate
the business opportunity contract or agreement.
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(20) A copy of the most recent audited financial
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statement of the seller, prepared within 13 months of the
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first offer in this State, together with a statement of any
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material changes in the financial condition of the seller
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from that date. The Secretary of State may accept the |
filing of a reviewed
financial statement in lieu of an |
audited financial statement.
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(21) A list of the states in which this business
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opportunity is registered.
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(22) A list of the states in which this disclosure
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document is on file.
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(23) A list of the states which have denied, suspended
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or revoked the registration of this business opportunity.
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(24) A section entitled "Risk Factors" containing a
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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.
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(25) Any additional information as the Secretary of
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State may require by rule, regulation, or order.
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(Source: P.A. 92-308, eff. 1-1-02.)
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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:
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(815 ILCS 705/3) (from Ch. 121 1/2, par. 1703)
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Sec. 3. Definitions. As used in this Act:
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(1) "Franchise" means a contract or agreement, either |
expressed or
implied, whether oral or written, between two or |
more persons by which:
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(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
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(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
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designating the franchisor or its affiliate; and
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(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;
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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:
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(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
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(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
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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
|
|
(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.
|
|
(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, |
|
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) |
|
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 |
|
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 |
|
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 |
|
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.
|
|
(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 |
|
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 |
|
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.
|
|
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)
|
|
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 |
|
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 |
|
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 |
|
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 |
|
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.)
|
|
(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 |
|
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 |
|
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
|
|
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 |
|
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 |