Sec. 36b-65. (Formerly Sec. 36-508). Registration and application by seller of business opportunity. Financial statement. Registration fee. Exemptions. - Connecticut Statutes

      Sec. 36b-65. (Formerly Sec. 36-508). Registration and application by seller of business opportunity. Financial statement. Registration fee. Exemptions. (a) Unless exempted by subsection (e) of this section, any person who advertises, sells, contracts, offers for sale or promotes any business opportunity in this state or from this state must register with the commissioner and file, in a form prescribed by said commissioner, an application which shall contain the following documents and information: (1) The official name and address and principal place of business of the seller and the parent firm or holding company of such seller, if any; (2) the business experience stated individually of each of the seller's directors and officers including the biographical data concerning all such persons; (3) the business experience of the seller, including the length of time such seller has conducted a business of the type to be operated by the purchaser-investor, has granted business opportunities for such business, and has granted business opportunities in other lines of business; (4) a copy of any contracts, agreements, brochures or other documents relating to the business opportunity; (5) a factual description of the business opportunity offered to be sold and of the services, training and assistance which will be provided by the seller to the purchaser-investor; (6) a statement describing any services, supplies, products, signs, fixtures or equipment relating to the establishment or the operating of the business opportunity which the purchaser-investor is required to purchase, lease or rent directly or indirectly from the seller; (7) a copy of the table of contents of any operations manual to be provided to the purchaser-investor; and (8) any other information the commissioner in his discretion reasonably requires. The application shall contain the seller's statement sworn to before a person qualified to administer oaths that the information contained in the application is true to the seller's knowledge.

      (b) The seller shall file with the commissioner: (1) 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. 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.

      (c) Upon satisfactory submission of the information and documents required by subsections (a) and (b) of this section and all the information and documents required by section 36b-64 and the payment of a registration fee of four hundred dollars, the commissioner shall issue a certificate stating that the business opportunity has been registered.

      (d) The commissioner may accept the uniform franchise offering circular adopted by The Midwest Securities Commissioners Association on September 2, 1975, with associated guidelines amended by The North American Securities Administrators Association from time to time, in lieu of the disclosure document required by section 36b-63, provided that (1) the disclosure document contains the cover sheet required by subsection (a) of said section 36b-63, (2) any additional information required by said section 36b-63 which is not contained in the uniform franchise offering circular is included in an addendum to the disclosure document, and (3) the seller files a cross-reference sheet indicating the location of the disclosures required by said section 36b-63.

      (e) The following business opportunities are exempt from subsections (a) and (b) of section 36b-62; sections 36b-63 and 36b-64; subsections (a), (b), (c), (d) and (f) of this section; section 36b-66 and subdivisions (1), (2) and (3) of section 36b-67: (1) (A) Subject to the provisions of subparagraph (B) of this subdivision, any business opportunity for which the initial payment made by the purchaser-investor per business opportunity does not exceed two hundred dollars, if no representations are made that the seller guarantees, either conditionally or unconditionally, that the purchaser-investor will derive income from the business opportunity. For purposes of this subparagraph, "initial payment" means the total amount the purchaser-investor becomes obligated to pay to the seller or to any third party either prior to or at the time of delivery of the products, equipment, supplies or services or within one year of the commencement of operation of the business by the purchaser-investor. If payment is over a period of time, "initial payment" shall include the sum of the down payment and the total periodic payments. "Initial payment" does not include periodic payments where the amount or rate of the payment is based on net revenue or gross revenue generated by the business. (B) The commissioner may, by regulation or order as to any business opportunity or type of business opportunity or transaction exempt under subdivision (1) (A) of this subsection, modify, withdraw, further condition or waive such conditions, in whole or in part, conditionally or unconditionally, on a finding that such regulation or order is necessary and appropriate, in the public interest or for the protection of purchaser-investors; (2) any business opportunity sold in this state exclusively to purchaser-investors each of whom has a net worth of not less than one million dollars exclusive of principal residence, home furnishings, and personal automobiles; and (3) any other business opportunity that the commissioner by regulation or order may exempt, conditionally or unconditionally, if the commissioner finds that enforcement of all the provisions of sections 36b-60 to 36b-80, inclusive, with respect to such business opportunity is not necessary to protect the public interest, and for the protection of purchaser-investors due to the limited character of the business opportunity, or because such business opportunity is, in the judgment of the commissioner, adequately regulated by federal law. The commissioner may by order deny, suspend or revoke any exemption with respect to a particular offering of one or more business opportunities in accordance with the provisions of section 36b-68. No order under this subsection may operate retroactively. No person may be considered to have violated any order issued under this subsection by reason of any offer or sale effected after the entry of such order if such person sustains the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of such order. In any proceeding under this subsection, the burden of proving an exemption is upon the person claiming it.

      (f) The seller shall immediately notify the commissioner of any material change in information contained in the application for registration, amend financial statements not less than quarterly and make appropriate amendment of the disclosure document.

      (P.A. 79-458, S. 6, 19; P.A. 80-262, S. 4, 10; P.A. 82-52, S. 4, 5; P.A. 83-217, S. 5, 7; P.A. 84-67, S. 5, 6; P.A. 88-339, S. 2; P.A. 92-89, S. 14, 20; P.A. 96-73, S. 2; P.A. 97-22, S. 11; P.A. 01-10, S. 7.)

      History: P.A. 80-262 required filing of balance sheet, income statement and statement of changes in financial condition as specified rather than single "financial statement" and amended provisions accordingly; P.A. 82-52 amended Subsec. (b) to require filing of a balance sheet as of a date not more than four months prior to the filing of registration statement and to limit waivers of the requirement for audited statements to sellers who have been in business for less than one year and amended Subsec. (d) to allow substitution of the Uniform Franchise Offering Circular in lieu of disclosure document; P.A. 83-217 amended Subsec. (b) to require filing of an income statement and statement of changes in financial condition as of a date not more than four months prior to filing of registration statement, to require filing of a balance sheet, income statement and statement of changes in financial position for the most recent fiscal year instead of the most recent three fiscal years, and a balance sheet, income statement and statement of changes in financial position for two fiscal years prior to most recent fiscal year accompanied by independent certified public accountant's opinion showing conformity with generally accepted accounting principles, and amended Subsec. (e) to specify those business opportunities which are exempt from the provisions of this chapter; P.A. 84-67 amended Subsec. (e) to exempt from registration any business opportunity sold in this state exclusively to purchaser-investors with individual net worth less than $1,000,000 and amended Subsec. (f) to require sellers to amend financial statements not less than quarterly; P.A. 88-339 added Subsec. (a)(7) re the table of contents of any operations manual which is to be provided to the purchaser-investor and required the application to include the seller's sworn statement that the information contained in the application is true; P.A. 92-89 increased the registration fee in Subsec. (c) from $200 to $400; Sec. 36-508 transferred to Sec. 36b-65 in 1995; P.A. 96-73 amended Subsec. (b) to expressly allow unaudited financial statements and to delete the commissioner's discretion to waive audited statements; P.A 97-22 made a technical change in Subsec. (e); P.A. 01-10 made technical changes in Subsec. (e).