Knowledge Highlights 5 December 2022

The Franchise (Amendment) Act 2020 (“Amendment Act”) came into force on 28 April 2022 and introduced various changes to the franchise laws and practice framework set out under the Malaysian Franchise Act 1998 (“Act”), including introducing more stringent requirements and penalties governing franchise registration in Malaysia.

One of the most notable changes to the Act is the alignment of the franchise registration process and requirements for foreign franchisors with local franchisors. Accordingly, a new software system called MyFEX 2.0 (“New System”) was unveiled by the Registrar of Franchises (“Registrar”) on 28 July 2022 to meet the requirements of the Amendment Act.

This Alert addresses key questions raised by existing franchisors (both local and foreign) and franchisees (both master and unit) relating to the New System and the practical impact of the amended Act on existing franchise registrations.

What is MyFEX 2.0?

MyFEX 2.0 is a new portal launched by the Ministry of Domestic Trade and Consumer Affairs (“MDTCA”), to replace the previous MyFEX 1.0 (“Old System”). This New System can be accessed here.

Moving forward, franchise applications are to be submitted via the New System. The New System streamlines the registration process of both franchisors and franchisees. Under the New System, both franchisor and franchisee will share a single account login ID to access the New System.

What is the status of existing franchise registrations made under the Old System?

Pursuant to the amended Act, all registered franchises will be deemed to have expired on 28 April 2022. All existing registered franchisors (both local and foreign) as well as all existing registered franchisees (both master and unit) are required to re-register their franchises under the New System, regardless of whether the franchise would still be considered valid under the Old System.

What is the time period to re-register?

The Act grants franchises registered under the Old System a grace period of three years to effect re-registration. This grace period is not extendable and is calculated from 1 August 2022, meaning all re-registrations should be completed by 31 July 2025.

Are there any consequences for failing to re-register?

Failure to re-register any franchise registration under the New System may result in a notice of suspension, termination and cancellation being issued by the Registrar.

Is the re-registration an automatic process?

Re-registration is not automatic and the application will be subject to a fresh examination process.

How does the New System impact foreign franchisors in terms of re-registration requirements?

The franchise registration process for foreign franchisors has been aligned with the more cumbersome franchise registration process for local franchisors. Documents and information not previously required under the Old System in relation to foreign franchisors (e.g. financial forecast details, submission of training and operation manuals, etc.) are now required to be submitted.

This is in addition to documents and information previously not required to be submitted under the Old System (e.g. information on shareholding types, number of franchisees under the franchise, etc.) but which are now required to be submitted under the New System by all franchisors.

Would it be sufficient for franchisors to re-submit the previous documentation previously submitted under the Old System for re-registration?

Information and documents submitted in the New System are required to be current and up-to-date. Whether franchisors can re-submit previous documentation lodged under the Old System would necessarily depend on whether they remain current and whether there have been any updates or changes during the intervening period. 

What is the effective period of re-registration?

A franchise registration will now only be effective for a prescribed period of five years from the date of the written notice given by the Registrar. The franchisor may apply for renewal of the registration within 30 days from the expiration of such registration.

What are the prescribed official fees for new applications and re-registrations under the New System?

New applications

No

Description

Fee Type

Amount (RM)

1.      

Registration of foreign franchisor

Approval Fee

5,000

Process Fee

50

2.      

Registration of local franchisor

Approval Fee

1,000

Process Fee

50

3.      

Registration of franchisee of foreign franchisor

Approval Fee

1,000

Process Fee

50

4.      

Registration of franchisee of local franchisor

Process Fee

20

 

Re-registrations

The prescribed official fees above are waived for franchisors and franchisees previously registered under the Old System, provided that the re-registration process is completed within the three-year grace period.

Subsequent renewal applications will be subject to the payment of a prescribed fee of RM1,000 for local franchisors and RM5,000 for foreign franchisors.

This article has been prepared with the assistance of Senior Associate Krystle Kok Sook Cheng.

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