In January 2015, a revised Franchising Code of Conduct (the Code) was enforced. The purpose of the revisions was to introduce financial penalties and infringement notices for serious breaches of the Code.
The Code requires a franchisor to provide prospective franchisees with a disclosure document as part of its disclosure obligations. The disclosure document must disclose relevant business experience of all its officers and other materially relevant facts. Materially relevant facts can include:
For the first time, the Australian Competition and Consumer Commission (ACCC) has commenced proceedings in the Federal Court of Australia for breaches of the Code against Pastacup’s current franchisor Morild Pty Ltd (Morild) and the Company’s former Director.
The ACCC has alleged that the Director’s involvement in two previous Pastacup franchisor companies that became insolvent should have been disclosed by Morild to potential franchisees. The ACCC is seeking penalties of up to $54,000.00 against Morild and the Director. The matter is currently before the Federal Court of Australia and a decision has yet to be handed down.
The Fair Work Act 2009 (Cth) (FW Act) contains civil penalty provisions for matters including underpayments, general protections and breaches of the National Employment Standards.
In light of the ACCC’s decision to prosecute, Directors who are found personally liable for breaches under the FW Act or even under State or Territory laws related to workplace relations have an obligation to disclose these matters under the Code or otherwise risk being prosecuted by the ACCC.
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