Franchising Laws - Singapore - International Franchise Association
Franchising Laws - Singapore - International Franchise Association Franchising Laws - Singapore - International Franchise Association
singapore gateway Law Corporation employees of the franchisor or the sub-franchisor may be personally liable for any misrepresentations made. 19 In addition to any laws or government agencies that specifically regulate offering and selling franchises, what are the general principles of law that affect the offer and sale of franchises? What other regulations or government agencies or industry codes of conduct may affect the offer and sale of franchises? There are no other relevant regulations or government agencies or industry codes of conduct that may affect the offer and sale of franchises. 20 What other actions may franchisees take if a franchisor engages in fraudulent or deceptive practices in connection with the offer and sale of franchises? How does this protection differ from the protection provided under the franchise sales disclosure laws? If the franchisor engages in fraudulent or deceptive practices, the franchisee may bring a civil action against the franchisor for fraudulent misrepresentation. The burden of proof is on the franchisee to show that the franchisor knew or believed that the statement made was wrong and that the franchisee entered into the agreement based on the franchisor’s false statement and as a result of the false statement the franchisee suffered loss. Legal restrictions on the terms of franchise contracts and the relationship between parties involved in a franchise relationship 21 Are there specific laws regulating the ongoing relationship between franchisor and franchisee after the franchise contract comes into effect? The Code of Ethics and general principles of contract law will apply. 22 Do other laws affect the franchise relationship? No. 23 Do other government or trade association policies affect the franchise No. relationship? 24 In what circumstances may a franchisor terminate a franchise relationship? What are the specific legal restrictions on a franchisor’s ability to terminate a franchise relationship? The franchise agreement would usually stipulate how and when the agreement shall be terminated by parties. Further, if there is a fundamental breach of contract by the franchisee, the franchisor may terminate the agreement under the general common law or contractual principles. 25 In what circumstances may a franchisee terminate a franchise relationship? The franchise agreement would usually stipulate how and when the agreement is to be terminated by the franchisee such as when the franchisor is insolvent or breaches the franchise agreement. Similarly, if there is a fundamental breach of contract by the franchisor, the franchisee may terminate the agreement under general common law or contractual principles. Update and trends According to Lim Hwee Hua, Singapore Minister of State for Finance and Transport, growth for the franchising business in Singapore continues to be promising. There are over 420 franchise systems and more than 30,000 franchisees operating in Singapore. The annual turnover is S$5.48 billion (approximately US$3.81 billin). A large number of franchised brands are related to the food and beverage industry; however, other sectors such as education and childcare are becoming an increasing trend. 26 May a franchisor refuse to renew the franchise agreement with a franchisee? If yes, in what circumstances may a franchisor refuse to 162 getting the Deal Through – Franchise 2009 renew? The franchise agreement may be renewed if there is a provision in the agreement that allows the franchise to be renewed. However, if there is no provision in the agreement, the franchisor may choose not to renew the franchise agreement. 27 May a franchisor restrict a franchisee’s ability to transfer its franchise or restrict transfers of ownership interests in a franchisee entity? The franchise agreement may be drafted to provide for the above if the franchisor wishes to restrict the franchisee’s liability to transfer its franchise or to restrict transfers of ownership interests. 28 Are there laws or regulations affecting the nature, amount or payment of fees? There are no laws or regulations affecting the nature, amount or payment of fees. 29 Are there restrictions on the amount of interest that can be charged on overdue payments? There are no specific restrictions on the amount of interest that can be charged on overdue payments. 30 Are there laws or regulations restricting a franchisee’s ability to make payments to a foreign franchisor in the franchisor’s domestic currency? Apart from withholding tax, there are no laws or regulations restricting a franchisee’s ability to make payments to a foreign franchisor in the franchisor’s domestic currency. 31 Are confidentiality covenants in franchise agreements enforceable? Yes, they are enforceable. 32 Is there a general legal obligation on parties to deal with each other in good faith? If so, how does it affect franchise relationships? There is no general legal obligation on parties to deal with each other in good faith. 33 Must disclosure documents and franchise agreements be in the language of your country? There is no specific requirement.
gateway Law Corporation singapore 34 What restrictions are there on provisions in franchise contracts? There are generally no restrictions on the provisions in franchise contracts except that it should not be anti-competitive. 35 Describe the aspects of competition law in your country that are relevant to the typical franchisor. How are they enforced? Competition law is governed by the Singapore Competition Act, chapter 50B. The Act promotes healthy competitive markets by prohibiting certain business practices that restrict competition in the market such as price-fixing, bid-rigging, market-sharing and abuse of market power. The Competitions Commission of Singapore (CCS) enforces gateway Law Corporation Max ng max.ng@gateway-law.com 152 Beach Road Tel: +65 6341 5779 #37-05/06 Gateway East Fax: +65 6341 5781 Singapore 189721 www.gateway-law.com the Competition Act. The CCS can therefore order that the anticompetitive activity be ceased and that financial penalties be imposed. 36 Very briefly describe the court system. What types of dispute resolution procedures are available relevant to franchising? Franchise disputes are generally heard in the civil courts. The amount claimed will determine which court the matter will be commenced in. If the claim amount is for a sum not exceeding S$60,000 (approximately US$41,800), the matter will be dealt in the magistrate courts. Claims worth between S$60,000 and S$250,000 (approximately US$147,000) are dealt with in the district courts, and claims above S$250,000 are dealt with in the High Court. www.gettingthedealthrough.com 163
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singapore gateway Law Corporation<br />
employees of the franchisor or the sub-franchisor may be personally<br />
liable for any misrepresentations made.<br />
19 In addition to any laws or government agencies that specifically regulate<br />
offering and selling franchises, what are the general principles of law<br />
that affect the offer and sale of franchises? What other regulations or<br />
government agencies or industry codes of conduct may affect the offer<br />
and sale of franchises?<br />
There are no other relevant regulations or government agencies<br />
or industry codes of conduct that may affect the offer and sale of<br />
franchises.<br />
20 What other actions may franchisees take if a franchisor engages in<br />
fraudulent or deceptive practices in connection with the offer and sale of<br />
franchises? How does this protection differ from the protection provided<br />
under the franchise sales disclosure laws?<br />
If the franchisor engages in fraudulent or deceptive practices, the<br />
franchisee may bring a civil action against the franchisor for fraudulent<br />
misrepresentation. The burden of proof is on the franchisee to<br />
show that the franchisor knew or believed that the statement made<br />
was wrong and that the franchisee entered into the agreement based<br />
on the franchisor’s false statement and as a result of the false statement<br />
the franchisee suffered loss.<br />
Legal restrictions on the terms of franchise contracts and the<br />
relationship between parties involved in a franchise relationship<br />
21 Are there specific laws regulating the ongoing relationship between<br />
franchisor and franchisee after the franchise contract comes into effect?<br />
The Code of Ethics and general principles of contract law will<br />
apply.<br />
22 Do other laws affect the franchise relationship?<br />
No.<br />
23 Do other government or trade association policies affect the franchise<br />
No.<br />
relationship?<br />
24 In what circumstances may a franchisor terminate a franchise<br />
relationship? What are the specific legal restrictions on a franchisor’s<br />
ability to terminate a franchise relationship?<br />
The franchise agreement would usually stipulate how and when the<br />
agreement shall be terminated by parties. Further, if there is a fundamental<br />
breach of contract by the franchisee, the franchisor may<br />
terminate the agreement under the general common law or contractual<br />
principles.<br />
25 In what circumstances may a franchisee terminate a franchise<br />
relationship?<br />
The franchise agreement would usually stipulate how and when the<br />
agreement is to be terminated by the franchisee such as when the<br />
franchisor is insolvent or breaches the franchise agreement.<br />
Similarly, if there is a fundamental breach of contract by the franchisor,<br />
the franchisee may terminate the agreement under general<br />
common law or contractual principles.<br />
Update and trends<br />
According to Lim Hwee Hua, <strong>Singapore</strong> Minister of State for Finance<br />
and Transport, growth for the franchising business in <strong>Singapore</strong><br />
continues to be promising. There are over 420 franchise systems and<br />
more than 30,000 franchisees operating in <strong>Singapore</strong>. The annual<br />
turnover is S$5.48 billion (approximately US$3.81 billin). A large<br />
number of franchised brands are related to the food and beverage<br />
industry; however, other sectors such as education and childcare are<br />
becoming an increasing trend.<br />
26 May a franchisor refuse to renew the franchise agreement with a<br />
franchisee? If yes, in what circumstances may a franchisor refuse to<br />
162 getting the Deal Through – <strong>Franchise</strong> 2009<br />
renew?<br />
The franchise agreement may be renewed if there is a provision in the<br />
agreement that allows the franchise to be renewed. However, if there<br />
is no provision in the agreement, the franchisor may choose not to<br />
renew the franchise agreement.<br />
27 May a franchisor restrict a franchisee’s ability to transfer its franchise or<br />
restrict transfers of ownership interests in a franchisee entity?<br />
The franchise agreement may be drafted to provide for the above if<br />
the franchisor wishes to restrict the franchisee’s liability to transfer its<br />
franchise or to restrict transfers of ownership interests.<br />
28 Are there laws or regulations affecting the nature, amount or payment of<br />
fees?<br />
There are no laws or regulations affecting the nature, amount or<br />
payment of fees.<br />
29 Are there restrictions on the amount of interest that can be charged on<br />
overdue payments?<br />
There are no specific restrictions on the amount of interest that can<br />
be charged on overdue payments.<br />
30 Are there laws or regulations restricting a franchisee’s ability to make<br />
payments to a foreign franchisor in the franchisor’s domestic currency?<br />
Apart from withholding tax, there are no laws or regulations restricting<br />
a franchisee’s ability to make payments to a foreign franchisor in<br />
the franchisor’s domestic currency.<br />
31 Are confidentiality covenants in franchise agreements enforceable?<br />
Yes, they are enforceable.<br />
32 Is there a general legal obligation on parties to deal with each other in<br />
good faith? If so, how does it affect franchise relationships?<br />
There is no general legal obligation on parties to deal with each other<br />
in good faith.<br />
33 Must disclosure documents and franchise agreements be in the language<br />
of your country?<br />
There is no specific requirement.
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