Mich. Admin. Code R. 445.503 - Waiver of audit; conditions and restrictions

Rule 503.

(1) The administrator may, in his discretion, waive the requirement of audited statements:

(a) For small franchisors when a certified financial statement is not required for protection of the public, and the franchisor agrees to furnish a certified audit within a reasonable time.

(b) In extraordinary cases, if the statements have been prepared by an independent certified public accountant, and the administrator is otherwise satisfied as to the reliability of the statements and as to the ability of the franchisor to perform future commitments.

(2) A waiver shall ordinarily be granted only upon a showing that the franchisor has not had prior audited statements; that the close of the most recent or current fiscal year is so near the time of filing of the application that it would be unreasonably costly or impractical to provide audited statements with the application; and that audited statements shall be furnished within a reasonable time after the end of the most recent or current fiscal year. In those cases, the administrator may impose an impound condition and other conditions and restrictions, as in his discretion, he deems appropriate.

(3) The use of an unaudited financial statement as provided herein does not relieve the applicant or any person from liability for false and misleading statements contained in a financial statement.

(4) In all instances in which the requirement for audited financial statements has been waived for a specified period of time, a franchisee who purchases a franchise during that period shall be entitled to damages or rescission under the same terms as provided under section 31 of the act if, upon availability of audited financial statements or any other valid basis, it is revealed that material adverse financial conditions existed at the time of the purchase which were not disclosed, and the prospectus shall so state.

Notes

Mich. Admin. Code R. 445.503

1979 AC