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Substitute House Bill No. 5407

PUBLIC ACT NO. 96-73

AN ACT CONCERNING THE CONNECTICUT BUSINESS OPPORTUNITY INVESTMENT ACT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36b-61 of the general statutes, as amended by section 137 of public act 95-79, is repealed and the following is substituted in lieu thereof:

When used in sections 36b-60 to 36b-79, inclusive, AS AMENDED unless the context otherwise requires: (1) "Commissioner" means the Commissioner of Banking or any person appointed or designated by the Commissioner of Banking to administer said sections. (2) "Person" means an individual, corporation, limited liability company, trust, partnership, incorporated or unincorporated association or any other legal entity. (3) "Purchaser-investor" means a person who has purchased or is solicited for the purchase of a business opportunity. (4) "Seller" means a person who is engaged in the business of selling or offering for sale business opportunities or any agent or representative of such person. (5) (A) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of a business opportunity or interest in a business opportunity for value. (B) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a business opportunity or interest in a business opportunity for value. Nothing in this subdivision shall limit or diminish the full meaning of the terms "sale", "sell", "offer" or "offer to sell" as construed by the courts of this state. (6) "Business opportunity" means the sale or lease, or offer for sale or lease of any products, equipment, supplies or services which are sold or offered for sale to the purchaser-investor for the purpose of enabling the purchaser-investor to start a business, and in which the seller represents (A) that the seller will provide locations or assist the purchaser-investor in finding locations for the use or operation of vending machines, racks, display cases or other similar devices, or currency-operated amusement machines or devices, or any other devices within the intent of sections 36b-60 to 36b-79, inclusive, AS AMENDED as the commissioner shall by regulation or order determine, on premises neither owned nor leased by the purchaser-investor or seller; or (B) that the seller will purchase any or all products made, produced, fabricated, grown, bred or modified by the purchaser-investor using in whole or in part, the supplies, services or chattels sold to the purchaser-investor; or (C) that the seller guarantees, either conditionally or unconditionally, that the purchaser-investor will derive income from the business opportunity; or that the seller will refund all or part of the price paid for the business opportunity, or repurchase any of the products, equipment, supplies or chattels supplied by the seller, if the purchaser-investor is unsatisfied with the business opportunity; or (D) that the seller will provide a sales program or marketing program to the purchaser-investor, provided [that] sections 36b-60 to 36b-79, inclusive, AS AMENDED shall not apply to the sale of a marketing program made in conjunction with the licensing of a registered trademark or service mark, provided [that] (i) such trademark or service mark has been effectively registered under federal law AND (ii) FOR SUCH TRADEMARK OR SERVICE MARK INITIALLY REGISTERED UNDER FEDERAL LAW ON OR AFTER OCTOBER 1, 1996, THE SELLER FILES WITH THE COMMISSIONER A COPY OF THE TRADEMARK OR SERVICE MARK CERTIFICATE PRIOR TO ANY OFFER OR SALE IN CONNECTICUT, PROVIDED FURTHER THAT FAILURE TO FILE SUCH CERTIFICATE SHALL NOT, IN AND OF ITSELF, PRECLUDE RELIANCE ON THIS EXCLUSION. "Business opportunity" does not include the sale of an ongoing business where the owner of that business sells and intends to sell only that one business opportunity; nor does it include the not for profit sale of sales demonstration equipment, materials or samples, for a total price of five hundred dollars or less to any one person. (7) "Not for profit sale" means a sale in which the seller recovers only the actual costs of producing and shipping the goods or materials sold. A sale shall not qualify as a not for profit sale if the price to the purchaser-investor includes any commissions, rebates, fees or overrides. (8) "Trademark" or "service mark" includes trademarks, trade names, service marks, logotypes, advertising or other commercial symbols. Sec. 2. Subsection (b) of section 36b-65 of the general statutes is repealed and the following is substituted in lieu thereof:

(b) The seller shall file with the commissioner(1) [a] A balance sheet, income statement and statement of changes in financial condition of such seller as of a date not more than four months prior to the filing of the registration statement WHICH FINANCIAL STATEMENTS MAY BE UNAUDITED, PROVIDED IF THE SELLER HAS BEEN IN BUSINESS FOR LESS THAN TWELVE MONTHS FROM THE DATE OF THE FILING OF THE REGISTRATION STATEMENT, SUCH FINANCIAL STATEMENTS SHALL BE REVIEWED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT AND SHALL INCLUDE A WRITTEN OPINION FROM SAID ACCOUNTANT STATING THAT HE IS NOT AWARE OF ANY MATERIAL MODIFICATIONS THAT SHOULD BE MADE TO THE FINANCIAL STATEMENTS IN ORDER FOR THEM TO BE IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (2) a balance sheet of such seller, an income statement and statement of changes in financial position for the most recent fiscal year audited by an independent public accountant or an independent certified public accountant and (3) a balance sheet and income statement and statement of changes in financial position for the prior two fiscal years reviewed by an independent certified public accountant who provides an opinion stating that he is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. If any material changes in the financial condition of such seller occur after such statements are prepared, such seller shall disclose such changes and explain their significance to the operation of a business opportunity. [The commissioner may waive the requirement for audited statements for sellers who have been in business for less than one year and who have not previously had such certified audits, provided the unaudited financial statements are reviewed by an independent certified public accountant who provides an opinion stating that he is not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles.] If the seller is controlled by any person who absolutely and unconditionally guarantees to assume the duties and obligations of such seller under the business opportunity agreement should such seller become unable to perform, the commissioner may accept consolidated financial statements from such seller and such person. If the commissioner finds that a seller has failed to demonstrate that adequate financial arrangements have been made to fulfill the obligations set forth in the business opportunity agreement, the commissioner may require the escrow or impoundment of fees and other funds paid by the purchaser-investor or purchaser-investors until such obligations have been fulfilled, or, at the option of such seller, the furnishing of a surety bond as provided by regulation or order of the commissioner, if he finds that such requirement is necessary and appropriate to protect purchaser-investors.

Sec. 3. Section 36b-79 of the general statutes is repealed and the following is substituted in lieu thereof:

Within one hundred and twenty days following the end of the seller's most recent fiscal year and each year thereafter, each seller whose business opportunity has been registered under sections 36b-60 to 36b-79, inclusive, AS AMENDED shall [submit] RENEW THE REGISTRATION BY SUBMITTING to the commissioner: (1) An annual renewal registration fee of one hundred dollars; (2) an application filed in accordance with the requirements of subsection (a) of section 36b-65, reflecting all amendments as of the date of filing; (3) a disclosure document filed in accordance with the requirements of sections 36b-62 and 36b-63, reflecting all amendments [as of the date of filing] CLEARLY MARKED, SINCE THE DATE OF THE MOST RECENT DISCLOSURE DOCUMENT THAT WAS FILED WITH THE COMMISSIONER, OR, IF NO SUCH AMENDMENTS HAVE BEEN MADE, AN AFFIDAVIT SO STATING; and (4) financial statements in accordance with the requirements of subsection (b) of section 36b-65 [4m, [0m AS AMENDED BY SECTION 2 OF THIS ACT. In the event that the seller fails to submit the fee and information within the time period and in accordance with requirements of this section, the registration of such seller's business opportunity shall [be deemed terminated] TERMINATE. Sec. 4. (NEW) No person shall make or cause to be made in any document filed with the commissioner or in any proceeding under sections 36b-60 to 36b-79, inclusive, of the general statutes, as amended, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.

Approved May 8, 1996. Effective October 1, 1996.

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