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Amendments to the Malaysian Franchise law



United Kingdom

Amendments to the Malaysian Franchise law

Franflash - October 2012


The Malaysian Franchise Act 1998 was amended in September 2012 in a number of ways, some of these amends will have a substantial impact on franchising in Malaysia.

Malaysia has not been the easiest of markets to enter since the advent of the 1998 Franchise law.  It was hoped that the new amendments would improve the situation, but that seems not to have been the case.

The scope of the Act has been broadened to cover franchise transactions which are concluded outside Malaysia but operated within Malaysia and the definition of "franchise" broadened to facilitate better enforcement.

There is now a requirement to register the franchise before the franchisor can operate a franchise business or make an offer to sell the franchise to any person. It also creates new offences centred around avoiding the impact of the act.

It is now compulsory for the franchisor to get approval from the Registrar if there are any changes to the disclosure document and there is clarification of the power of Registrar to suspend and terminate the registration of franchise. The power to the Registrar to cancel registration of the franchise business is also increased and clarified.

The good news for franchisors is that there is now more time for the franchisor to submit its annual report to the Registrar which is thirty days from the anniversary date of the registration to six months from the end of each financial year of the franchise business.

The obligation of the franchisor to state in writing in the disclosure documents is also clarified in the event that the franchisor requires any payment from the franchisee before signing of the franchise agreement. The franchisee must now give the franchisor six months notice of its desire to extend the franchise term.

It also further regulates franchise consultants and brokers.

So, all in all the amendments are helpful in that they clarify a number of issues that have been causing franchisors difficulties in Malaysia, but it does not seem to help make Malaysia an easier target market for foreign franchisors.

For more information please contact your usual Fieldfisher contact.

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