Usually in this period, whether its end of the year or early in the year, Franchisors will be busy with annual reports for their respective franchise brands. The Ministry of Domestic Trade through the office of the Registrar of Franchise is responsible in the handling of the annual reports.

It is of no surprise that during the period of lockdown and the continuing Covid19 virus, of the almost 600 franchises registered in Malaysia, a mere 10% actually filed their annual reports. It is understandable.

However, as Covid19 now evolved to Covid22, and now almost a pandemic with the full-blown SOP in placed, franchisors in Malaysia MUST adhere to section 16(1) Franchise Act 1998. Section 16 is reproduced below:-

16(1) The franchisor shall, within six months from the end of each financial year of the franchise business, submit a report to the Registrar in the prescribed form.

16(2) The report shall contain the disclosure documents which have been updated.

16(3) The Registrar may review the report and disclosure documents and—

(a) notify the franchisor if any additional information or modification of the disclosure documents is to be included or deleted; or

(b) issue an order to suspend, terminate or cancel the approval of the registration of the franchise in the public interest or for the purpose of protecting prospective franchisees until any deficiencies specified by the Registrar have been corrected.

16(4) Any person who fails to comply with this section commits an offence.

The law is simple, it is an offence for non-filing with the Registrar the annual report. Not only that but should there be any updates or amendments as mentioned in section 16(2), it must be stated in the updates or amendments.

A simple example. Let us say in 2020 there is about 20 outlets, in 2021, there is only 8 outlets, it has to be mentioned in the annual report. If there is an amendment to any part of the documents such as amendment in the agreement or disclosure document, that has to be updated as well in the annual report.

Noting the fact that section 16(3) allows the Registrar to review the report and at the same time may issue orders if the said franchise has deficiencies that must be corrected to protect public interest and prospective franchisee.

Be that as it may, any decision by the Registrar, is appealable via section 17 of the Act, which is reproduced below:-

Appeal against Registrar’s decision

17(1) A person who is aggrieved by any decision of the Registrar under this Part may appeal to the Minister in the prescribed manner within one month from the date the decision is communicated to the person.

17(2) The Minister’s decision on the appeal shall be final

At the time of writing, no decision has been made by the Registrar in terms of annual fee.