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Outdated Franchisor Solvency Statements

Posted on 31 October 2014

The case of SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 has considered the franchisor's obligation to provide updated solvency statements in disclosure documents given after the end of a financial year but before the disclosure document has been updated in accordance with the Franchising Code of Conduct (which currently allows franchisors until 31 October, 2014 to update it disclosure document for the previous financial year).

It was held the franchisor needed to provide a solvency statement for the previous financial year even if the disclosure was given in say July of the following financial year otherwise the franchisor was not complying with it obligation to give a current disclosure document.

Once the changes to the Code come in a franchisor could be subject to large penalties if the franchisor does not comply with the code.

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