TITLE XXXI
TRADE AND COMMERCE
Chapter 358-E
DISTRIBUTORSHIP DISCLOSURE ACT
Section 358-E:1
358-E:1 Definitions. –
As used in this chapter:
I. [Repealed.]
II. "Distributorship" means a contract or agreement, either express or implied, whether oral or written, by which the grantor, in exchange for the payment of a distributorship fee:
(a) Grants the distributor the right to:
(1) Offer, sell or distribute goods manufactured or supplied by the grantor through vending machines, racks, display cases, or other similar devices; or
(2) Purchase from the grantor or an affiliate of the grantor an inventory of products for sale or distribution in or on such vending machines, racks, display cases, or other similar devices; or
(3) Purchase or lease from the grantor or an affiliate of the grantor vending machines, racks, display cases, or other similar devices to be used for the sale or distribution of merchandise; and
(b) Represents that it will provide locations or assist the distributor in finding locations for the use or operation of such vending machines, racks, display cases, or other similar devices on property owned, leased or controlled by a third party.
III. "Person" means any person defined by RSA 358-A:1, I.
IV. "Grantor" is a person who grants a distributorship or any agent or representative thereof.
V. "Distributor" means a person to whom a distributorship is granted.
VI. "Prospective distributor" means any person who approaches, or is approached by, a grantor for the purpose of investigating the prospect of establishing a distributorship between such person and such grantor.
VII. "Distributorship fee" means a fee or charge that a distributor is required to pay or agrees to pay for the right to enter into a business under a distributorship agreement, including but not limited to payments for goods and services. "Distributorship fee" shall not include payments for the purchase of sales demonstration equipment and materials furnished on a nonprofit basis for use in making sales and not for resale.
Source. 1977, 307:1. 1979, 171:1. 1985, 300:29, IV.
Section 358-E:2
358-E:2 Prohibitions on the Advertising or Sale of Distributorships. –
No person may advertise, offer, contract, sell, or promote any distributorship in this state unless the person has registered with the attorney general, as provided in RSA 358-E:3.
Source. 1977, 307:1, eff. Aug. 26, 1977.
Section 358-E:3
358-E:3 Registration. –
I. Unless exempted by paragraph V, any person who advertises, offers, contracts, sells or promotes any distributorship in the state must register with the attorney general and file, in a form prescribed by the attorney general, an application which shall contain the following documents and information:
(a) An irrevocable appointment of the attorney general to receive service of any lawful process in any noncriminal proceeding arising under this chapter against the grantor or his personal representatives;
(b) The official name and address and principal place of business of the grantor and the parent firm or holding company of the grantor, if any;
(c) The business experience stated individually of each of the grantor's directors and officers including the biographical data concerning all such persons;
(d) The business experience of the grantor, including the length of time the grantor has conducted a business of the type to be operated by the distributor, has granted distributorships for such business, and has granted distributorships in other lines of business;
(e) Where such is the case, a statement that the grantor or any of its current directors or officers:
(1) Has been held liable in a civil action by final judgment, convicted of a felony or pled nolo contendere to a felony charge if such felony or civil action involved fraud, embezzlement, fraudulent conversion or misappropriation of property for the most recent 7 year period;
(2) Is subject to any currently effective state or federal agency injunctive or restrictive order relating to or affecting distributorship activities or the grantor/distributor relationship;
(3) Has filed in bankruptcy or has been associated as a director or officer of any company that has filed bankruptcy or reorganization proceedings for the most recent 7 year period;
(4) Has been a party to any cause of action brought by distributors against the grantor for the most recent 7 year period which resulted either in an out-of-court settlement or a judgment against the grantor; and
(5) Is presently a party to any cause of action brought by a distributor against the grantor;
such statement shall set forth the identity and location of the court, date of conviction or judgment, and penalty imposed or damages assessed, and the date, nature, and issuer of each such order or ruling;
(f) A copy of any contracts, agreements, brochures or other documents relating to the distributorship;
(g) A factual description of the distributorship offered to be sold and of the services, training and assistance which will be provided by the grantor to the distributor;
(h) A statement describing the total funds which must be paid by the distributor to the grantor in order to obtain or commence the distributorship operation, such as deposits, down payments and fees; and, if all or part of these fees or deposits are returnable under certain conditions, these conditions should be set forth; and, if not returnable, such fact shall be disclosed;
(i) A statement describing the recurring fees required to be paid, in connection with carrying on the distributorship business, by the distributor to the grantor;
(j) If the grantor proposes to use estimated or projected distributorship sales or earnings, a statement of such estimates or projections together with an explanation of the bases and assumptions underlying such estimates or projections and any supportive data;
(k) A statement disclosing:
(1) The number of distributorships operating at the end of the last calendar year; and
(2) The names and addresses of all distributorships located in this state;
(l) A statement describing any services, supplies, products, signs, fixtures, or equipment relating to the establishment or the operating of the distributorship which the distributor is required to purchase, lease or rent directly or indirectly from the grantor;
(m) A statement of whether the grantor will receive any income or other consideration from suppliers of goods or services required or suggested to be purchased by the distributor;
(n) A statement of the terms and conditions of any financing arrangement offered directly or indirectly by the grantor; and a statement of whether the grantor will receive any payments from any person for the placement of financing with such person;
(o) A statement whether, by the terms of the distributorship agreement or other device or practice, the distributor is limited in the goods or services he may offer for sale, or limited in the customers to whom he may sell such goods or services or is promised an exclusive or protected territory in which he may sell such goods or services;
(p) A statement disclosing the conditions and terms under which the grantor allows the distributor to sell, lease, assign, or otherwise transfer his distributorship, or any interest therein and the amount of consideration which must be paid to the grantor for such sale, lease, assignment or transfer, if any;
(q) A statement disclosing:
(1) The conditions under which the distributorship agreement may be terminated by the grantor, renewal may be refused, or the distributorship may be repurchased by the grantor at its option;
(2) The number, stated for each category, of distributorships which were terminated, renewal refused or repurchased during the preceding calendar year and a complete explanation thereof; and
(3) The conditions under which the distributorship agreement may be terminated by the distributor and the number of distributorships voluntarily terminated by distributors during the preceding calendar year;
(r) The disclosure statement required by RSA 358-E:4, if in different form than the application; and
(s) Any other information required by rule adopted by the attorney general, pursuant to RSA 541-A.
II. The grantor shall file with the attorney general a financial statement of the grantor, audited by an independent certified public accountant, as of the close of the most recent fiscal year of the grantor. If any material changes in the financial condition of the grantor occur after such statement is prepared, the grantor must disclose such changes and explain their significance to the operation of a distributorship. The attorney general may, in his discretion, waive the requirement for audited statements for grantors who have not previously had such certified audits, provided the unaudited financial statement is prepared by an independent certified public accountant. If the grantor is controlled by any person who absolutely and unconditionally guarantees to assume the duties and obligations of the grantor under the distributorship agreement should the grantor become unable to perform, the attorney general may, in his discretion, accept a consolidated financial statement from the grantor and such person. If the attorney general finds that a grantor has failed to demonstrate that adequate financial arrangements have been made to fulfill the obligations set forth in the distributorship agreement, the attorney general may require the escrow or impoundment of fees and other funds paid by the distributor or distributors until such obligations have been fulfilled, or, at the option of the grantor, the furnishing of a surety bond as provided by rule or order of the attorney general, if he finds that such requirement is necessary and appropriate to protect distributors.
III. Upon satisfactory submission of the information and documents required by paragraphs I and II and the payment of a registration fee of $50, the attorney general shall issue a certificate stating that the distributorship has been registered.
IV. The attorney general may accept any registration filed with agencies of the United States or any other state, in lieu of the filing required by this chapter, if he determines the acceptance of such registration will adequately protect the public.
V. The attorney general may from time to time by order exempt from the provisions of this chapter any distributorship if he finds that the enforcement of all the provisions of this chapter with respect to such distributorship is not necessary in the public interest and for the protection of distributors due to the limited character of the distributorship, or the small amount of money involved or because such distributorship is, in the judgment of the attorney general, otherwise adequately regulated by federal or state law or because such distributorship has been registered and approved pursuant to the laws of the United States or any other state.
VI. The grantor shall immediately notify the attorney general of any material change in information contained in the application for registration and shall make appropriate amendment of the disclosure statement.
VII. [Repealed.]
Source. 1977, 307:1. 1985, 300:7, I(b), 24, 25, 26; 300:30, eff. July 1, 1987.
Section 358-E:4
358-E:4 Disclosure Statement. –
A grantor shall provide to each prospective distributor a disclosure statement which contains the documents and information required to be filed with the attorney general at least 7 days prior to entering into any distributorship contract or agreement with such prospective distributor, or at least 7 days prior to the receipt by the grantor of any consideration from the prospective distributor, whichever occurs first.
Any distributorship contract or agreement shall state in immediate proximity to the space reserved for the distributor's signature, in boldface type of a minimum size of 10 points, a statement in substantially the following form:
"THE NEW HAMPSHIRE DISTRIBUTORSHIP DISCLOSURE ACT MAKES IT UNLAWFUL TO SELL ANY DISTRIBUTORSHIP IN THIS STATE WHICH IS SUBJECT TO THAT ACT WITHOUT FIRST PROVIDING TO THE PROSPECTIVE DISTRIBUTOR AT LEAST 7 DAYS PRIOR TO THE EXECUTION BY SUCH DISTRIBUTOR OF ANY BINDING DISTRIBUTORSHIP AGREEMENT, OR AT LEAST 7 DAYS PRIOR TO THE PAYMENT OF ANY CONSIDERATION, WHICHEVER OCCURS FIRST, A COPY OF THIS DISCLOSURE STATEMENT, TOGETHER WITH A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE DISTRIBUTORSHIP. IF THESE DOCUMENTS HAVE NOT BEEN PRESENTED TO YOU IN ACCORDANCE WITH THESE REQUIREMENTS, YOU MAY VOID THE AGREEMENT WITHIN 90 DAYS BY SENDING NOTICE OF YOUR INTENTION TO THE GRANTOR BY UNITED STATES MAIL, RETURN RECEIPT REQUESTED. UPON RECEIPT OF THE NOTICE, THE GRANTOR MUST REFUND ALL MONIES YOU HAVE PAID FOR THE DISTRIBUTORSHIP PLUS INTEREST. THE DISCLOSURE STATEMENT CONTAINS A SUMMARY ONLY OF CERTAIN MATERIAL PROVISIONS OF THE DISTRIBUTORSHIP AGREEMENT. THE AGREEMENT SHOULD BE CAREFULLY READ FOR AN UNDERSTANDING OF ALL RIGHTS AND OBLIGATIONS OF BOTH GRANTOR AND DISTRIBUTOR."
Source. 1977, 307:1. 1985, 300:7, I(b).
Section 358-E:5
358-E:5 Acts Unlawful. –
It shall be unlawful for any person, in connection with the advertising, offering, contracting, sale or promoting of any distributorship in this state:
I. To fail to comply with any provision of this chapter;
II. To employ any device, scheme or artifice to defraud a distributor;
III. To make any untrue statement of a material fact, or to omit to state a material fact in connection with the documents and information required to be furnished to the attorney general or prospective distributor; and
IV. To make any claim or representation in advertising or promotional material, or in any oral sales presentation, solicitation, or discussion between the grantor and a prospective distributor, which is inconsistent with the information required to be disclosed by this chapter.
Source. 1977, 307:1. 1985, 300:7, I(b).
Section 358-E:6
358-E:6 Remedies. –
I. Any violation of the provisions of this chapter is an unfair or deceptive act or practice within the meaning of RSA 358-A:2. Any right or remedy set forth in RSA 358-A may be used to enforce the provisions of this chapter.
II. Any distributor may bring an action under RSA 358-A for violation of this chapter to recover damages sustained by reason of such violation against the grantor or any other person who has materially participated or aided in making such sale. Said distributor may proceed against any escrowed or impounded funds or surety bond to recover damages.
III. (a) If the grantor has failed to register the distributorship or has failed to provide to a distributor a disclosure statement as required by this chapter, the distributor may elect to void the distributorship agreement. Notice of any such election shall be given by the distributor within 90 days after the distributor has knowledge of the failure of the grantor to comply with the requirements of this chapter to each person from whom recovery will be sought, by United States mail, return receipt requested, or by personal service.
(b) Upon receipt of such notice, the grantor or any other person who has materially participated or aided in making such sale may offer to return any consideration paid or to repurchase the distributorship for a price equal to the full amount paid, together with 6 percent interest on said amount from the date of payment, less any income received from the distributorship. Every offer shall be in writing, shall be delivered to the distributor or sent by United States mail, return receipt requested, addressed to the distributor, shall offer to return any consideration paid or to repurchase the distributorship for a price equal to the full amount paid together with 6 percent interest on said amount from the date of payment, less any income received by the distributor, and may require the distributor to return to the person making such offer all unsold goods, equipment, fixtures, leases and similar items received. Such offer shall continue in force for 15 days from the date on which it was received by the distributor, shall advise the distributor of such rights and the period of time limited for acceptance thereof, and shall contain such further information, if any, as the division may prescribe. If the offer is accepted, the grantor must pay all sums due within 10 days of its receipt of the acceptance.
(c) A distributor shall waive any right to proceed against the grantor for its failure to register or provide a disclosure statement if said distributor fails to accept an offer tendered pursuant to the provisions of paragraph III(a) and (b).
Source. 1977, 307:1, eff. Aug. 26, 1977.