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Current Status Bill Number:View additional legislative information at the LPITS web site.4019 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19990429 Primary Sponsor:Mason All Sponsors:Mason, Riser, Wilkins Drafted Document Number:l:\council\bills\nbd\11353djc99.doc Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Subject:Business opportunity sellers, registration of; Business Opportunity Sales Act, Businesses and Corporations History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ House 20000111 Co-Sponsor added (Rule 5.2) by Rep. Wilkins House 19990603 Co-Sponsor added (Rule 5.2) by Rep. Riser House 19990429 Introduced, read first time, 26 HLCI referred to Committee Versions of This Bill
TO AMEND SECTION 39-57-20, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEFINITION OF "BUSINESS OPPORTUNITY", SO AS TO REDEFINE "BUSINESS OPPORTUNITY" AND PROVIDE A DEFINITION FOR "GUARANTEE", TO AMEND SECTION 39-57-50, AS AMENDED, RELATING TO REGISTRATION AND FILING OF INFORMATION WITH THE SECRETARY OF STATE, SO AS TO REQUIRE REGISTRATION AND FILING OF REGISTRATION STATEMENTS BY SELLERS OF BUSINESS OPPORTUNITIES, TO AMEND SECTION 39-57-55, AS AMENDED, RELATING TO REGISTRATION PERIODS, SO AS TO PROVIDE THAT THE SECRETARY OF STATE MAY INVESTIGATE OFFERS TO SELL AND SALES OF BUSINESS OPPORTUNITIES FOR VIOLATIONS OF THE BUSINESS OPPORTUNITY SALES ACT, TO PROVIDE FOR NOTICE OF VIOLATIONS OF THE BUSINESS OPPORTUNITY SALES ACT, ADMINISTRATIVE FINES, AND EVIDENTIARY HEARINGS IN CONNECTION WITH ADMINISTRATIVE FINES UNDER THE ADMINISTRATIVE PROCEDURES ACT, TO AMEND CHAPTER 57, TITLE 39, RELATING TO THE SALE OF BUSINESS OPPORTUNITIES BY ADDING SECTION 39-57-57, SO AS TO PROVIDE FOR THE APPLICATION OF THE BUSINESS OPPORTUNITY SALES ACT TO THE SALE OF BUSINESS OPPORTUNITIES IN THIS STATE; AND BY ADDING SECTION 39-57-90, SO AS TO PROVIDE THAT THE FIRST TWO HUNDRED THOUSAND DOLLARS IN ADMINISTRATIVE FINE REVENUE EACH FISCAL YEAR MAY BE RETAINED BY THE SECRETARY OF STATE TO OFFSET THE EXPENSES OF ENFORCING THIS CHAPTER, AND TO PROVIDE FOR FURTHER DISPOSITION OF ADMINISTRATIVE FINE REVENUE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 39-57-20 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 39-57-20. As used in this chapter:
(1) 'Business opportunity' means the sale or lease of any products, equipment, supplies, or services which are sold to the purchaser for the purpose of enabling the purchaser to start a business, for which the purchaser is required to pay pays the seller a fee which exceeds two hundred fifty dollars, whether directly or indirectly, during the period from anytime before commencing operation to within six months after commencing operation of the business opportunity and in which the seller represents:
(1)(a) that he will provide locations or assist the purchaser in finding locations including, but not limited to, referring the purchaser to a locator, for the use or operation of vending machines, racks, display cases or other similar devices, or currency-operated amusement machines or devices, on premises neither owned nor leased by the purchaser or seller; or
(2)(b) that he will purchase any or all products made, produced, fabricated, grown, bred, or modified by the purchaser using in whole or in part, the supplies, services, or chattels sold to the purchaser; or
(3)(c) that he guarantees that the purchaser will derive income from the business opportunity which exceeds the price paid for the business opportunity; or that he 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 is unsatisfied with the business opportunity; or
(4)(d) the seller will provide a sales program or marketing program which will enable the purchaser to derive income from the business opportunity which exceeds the price paid for the business opportunity; provided, that this subsection does not apply to the sale or a marketing program made in conjunction with the licensing of a federally registered trademark or service mark.
'Business opportunity' does not include the offer or sale of ongoing businesses when the owner of those businesses sells or intends to sell any portion thereof; provided, a business is not considered an ongoing business unless it has filed income tax returns with the South Carolina Department of Revenue for at least one year; nor does it include the offer or sale of assets or substantially all of the assets of an ongoing business; nor does it include payment for the not-for-profit sale of sales demonstration equipment, material or samples, or where the payment is made for product inventory sold to the purchaser at a bona fide wholesale price; nor does it include the offer or sale or lease of any products, equipment, supplies, or services where the seller has a net worth on a consolidated basis, according to its most recent audited financial statement, of not less than ten million dollars.
(2) 'Guarantee' means a written or oral presentation that would cause a reasonable person in the purchaser's position to believe the income is assured."
SECTION 2. Section 39-57-50 of the 1976 Code, as last amended by Act 501 of 1992, is further amended to read:
"Section 39-57-50. (A) The seller of every business opportunity shall file with the Secretary of State a copy of the disclosure statement required by Section 39-57-30 before placing an advertisement or making other representations to prospective purchasers in this State and shall update this filing as a material change in the required information occurs, but no less than biennially. If the seller is required by Section 39-57-40 to provide a bond or establish a trust account, he contemporaneously shall file with the Secretary of State a copy of the bond or a copy of the formal notification by the depository that the trust account is established. The Secretary of State shall charge a nonrefundable filing fee of one hundred dollars for processing and maintaining the information filed by the seller.
(B) The Secretary of State shall maintain a record of all sellers registering under this chapter and shall assign a registration number to each. The seller must be advised in writing of the assigned registration number, and advertisements, pamphlets, or brochures used in the promotion of the business opportunity by the seller must include the assigned registration number in the following manner: "S.S. Reg. No. __________."
(C) A person who fails to file is guilty of a misdemeanor and, upon conviction, must be fined not more than two hundred dollars or imprisoned not more than thirty days. Each day a person fails to file constitutes a separate offense. The seller of every business opportunity in this State must:
(1) register and file a registration statement with the Secretary of State on forms prescribed by the Secretary of State;
(2) file a copy of the disclosure statement required by Section 39-57-30 with the Secretary of State before making a sale or offer to sell or placing an advertisement or making other representations to prospective purchasers in this State;
(3) update the information required in the disclosure statement annually on or before the seller's original registration anniversary date and whenever a material change in the required information occurs; and
(4) when the seller is required to provide a bond or establish a trust account by Section 39-57-40, file a copy of the bond, or the formal notification by a depository that a trust account is established, or both, as applicable.
The registration statement and disclosure forms and any other documents required to be filed with the Secretary of State must be signed and certified as true by the chief executive officer of the business offered or sold.
The Secretary of State shall charge a nonrefundable filing fee of fifty dollars for processing the registration and maintaining the information filed by the seller. This section does not prevent the Secretary of State from refusing to approve a registration statement, disclosure document or other information filed.
(B) The Secretary of State shall maintain a record of all sellers registering under the chapter and shall assign a registration number to each. The seller must be advised in writing of the assigned registration number, and advertisements, pamphlets, or brochures used in the promotion of the business opportunity by the seller must include the assigned registration number in the following manner: 'S.S. Reg. No. ________'.
(C) A person who fails to file a document or information required by this section is guilty of a misdemeanor and, upon conviction, may be fined not more than two hundred dollars or imprisoned not more than thirty days, or both. Each day a person fails to file a document or information required by this section constitutes a separate offense."
SECTION 3. Section 39-57-55 of the 1976 Code, as added by Act 501 of 1992, is amended to read:
"Section 39-57-55. (A) Licenses required by Chapter 57 of Title 39 to be registered biennially must be assigned registration periods as provided in this section.
(1) Upon the first reregistration of the licenses by the South Carolina Secretary of State's Office after the effective date of biennial licensure, a biennial registration period must be implemented as follows:
(a) Licensees whose license numbers end in:
( i) an even number and expire between July 1, 1992, and December 31, 1992, shall obtain a biennial registration;
(ii) an even number and expire between January 1, 1993, and June 30, 1993, shall reregister their licenses for one year. At the end of that time they shall reregister their license for two years and biennially after that time;
(iii) an odd number and expire between July 1, 1992, and December 31, 1992, shall register their licenses for one year. At the end of that time they shall register their license for two years and biennially after that time;
(iv) an odd number and expire between January 1, 1993, and June 30, 1993, shall obtain a biennial registration;
(v) "A" through "L" and expire between July 1, 1992, and June 30, 1993, shall obtain a biennial registration;
(vi) "M" through "Z" and expire between July 1, 1992, and June 30, 1993, shall obtain a one-year registration and obtain a biennial registration after that time.
(b) Licenses issued in South Carolina for the first time between:
(i) July 1, 1992, and December 31, 1992, which end in an even number must be issued for a biennial registration period;
(ii) between July 1, 1992, and December 31, 1992, which end in an odd number must be issued for one year. At the end of that time the license must be renewed for two years and biennially after that time;
(iii) January 1, 1993, and June 30, 1993, which end in an even number must be issued for one year. At the end of that time the license must be renewed for two years and biennially after that time;
(iv) January 1, 1993, and June 30, 1993, which end in an odd number must be issued biennially;
(v) July 1, 1992, and June 30, 1993, and issued license numbers which end in "A" through "L" must be issued biennially;
(vi) between July 1, 1992, and June 30, 1993, and which end in "M" through "Z" must be issued for one year and renewed biennially after that time.
(2) Registrations are valid until the last day of the month in which the registration expires. The license fees charged during the conversion process must be prorated for the length of the license issued.
(B) After June 30, 1993, licensees must be registered and licensed for twenty-four consecutive months, and the registrations expire on the last day of the twenty-fourth month. The registration and licensing of every licensee must be renewed biennially upon application by the holder and by payment of fees required by law to take effect on the first day of the month following the expiration of the registration and licensing to be renewed. This section does not prevent the Secretary of State's Office from refusing to issue a license.
Upon complaint or on his own motion, the Secretary of State may investigate the advertisement, offer to sell, and sale of any business opportunity in this State to determine whether any person has communicated or filed false or misleading statements or violated any provision of this chapter. The Secretary of State may subpoena persons and require the production of documents, records, and other tangible evidence to aid in the investigation of alleged violations of this chapter.
(B) Whenever it appears to the Secretary of State that a person has engaged in any act or practice constituting a violation of this chapter, the Secretary of State shall notify the person of the violation by registered or certified mail, with return receipt requested, to the person's last known address. If registration or the filing of disclosure documents or other information required by this chapter does not occur within fifteen days after notice, or if an existing or ongoing violation of this chapter is not corrected or discontinued within fifteen days after notice, the Secretary of State may assess an administrative fine not to exceed five thousand dollars for each separate violation against the responsible person.
(C) A person assessed an administrative fine under this chapter has thirty days after receipt of notice of the fine from the Secretary of State to pay the assessed fine or request an evidentiary hearing under the Administrative Procedures Act. A person who fails to remit an assessed fine or to request an evidentiary hearing within the thirty-day period after notice is liable for the amount of the fine after the expiration of the thirty-day period, may have his registration suspended or revoked, and be temporarily or permanently enjoined from further activity involving the direct or indirect sale of business opportunities in this State."
SECTION 4. Chapter 57, Title 39 of the 1976 Code is amended by adding:
"Section 39-57-57. (A) The provisions of this act relating to sales and offers to sell apply to persons who sell or offer to sell when:
(1) an offer to sell is made in this State;
(2) an offer to purchase is made and accepted in this State; or
(3) the purchaser is domiciled in this State and the business opportunity is or will be operated in this State.
(B) For the purpose of this section, an offer to sell is made in this State, whether or not either party is then present in this State, when:
(1) the offer originates from this State; or
(2) the offer is directed by the offeror to this State and received at the place to which it is directed at any post office in this State in the case of a mailed offer.
(C) For the purpose of this section, an offer to sell is accepted in this State when acceptance:
(1) is communicated to the offeror in this State; and
(2) has not previously been communicated to the offeror, orally or in writing, outside this State; and acceptance is communicated to the offeror in this State, whether or not either party is present in this State when the offeree directs it to the offeror in this State reasonably believing the offeror to be in this State and it is received at the place to which it is directed or at any post office in this State in the case of a mailed acceptance.
(D) When any person, including any nonresident of this State, engages in conduct prohibited or made actionable by this act and the person has not filed a consent to service of process and personal jurisdiction over the person cannot otherwise be obtained in this State, that conduct shall be considered equivalent to the person's appointment of the Secretary of State to receive service of any lawful process in any noncriminal suit, action, or proceeding against the person or the person's successor, executor, or administrator which stems from that conduct and which is brought under this act with the same force and validity as if served on the person personally. Service may be made by leaving a copy of the process with the Secretary of State and is not effective unless:
(1) the plaintiff, who may be the Secretary of State in a suit, action, or proceeding instituted by the Secretary of State sends notice of the service and a copy of the process by certified or registered mail to the defendant's or respondent's last known address;
(2) the plaintiff's affidavit of compliance with this subsection is filed in the case on or before the return date of the process, if any, or within such further time as the court allows."
SECTION 5. Chapter 57, Title 39 of the 1976 Code is amended by adding:
"Section 39-57-90. The first two hundred thousand dollars in administrative fine revenue received pursuant to this chapter in a fiscal year may be retained by the Secretary of State to offset the expenses of enforcing this chapter. All administrative fines collected pursuant to this chapter in excess of two hundred thousand dollars in a fiscal year must be transmitted to the State Treasurer and deposited in the state general fund. All fees collected under this chapter must be transmitted to the State Treasurer and deposited in a fund separate and distinct from the state general fund and used by the Secretary of State for the purpose of administering the provisions of this chapter."
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