Malaysia: Change in franchising legislation under the Franchise (Amendment) Act 2020

What has changed?

On 28 July 2022, the Malaysian Franchise (Amendment) Act 2020 (the new law) came into force. One of the main effects of the new law is that all franchise registrations under the Malaysian Franchise Act 1998 (the old law) have now expired.

How does this impact existing franchise businesses in Malaysia?

Essentially, all franchisors who were previously registered under the old law and system (“existing franchisors”) are now required to re-register their franchise under the new law. This must be completed in accordance with a new system (MyFex 2.0), which was also introduced on 28 July 2022.

Based on the information currently available, the recommended steps an existing franchisor can take to re-register its franchise under the new system are as follows:

1. Franchisors should submit their franchise business annual reports to the Malaysian Franchise Registrar; and
2. once registered, franchisors are obliged to re-register each franchisee(s) who was/were previously registered under the old system (“registered franchisee”). This is completed via the same registered account that the franchisor is required to set up under the new system.

Fees and the effect of non-registration

While there are prescribed official fees for new applications under the new system, these are currently being waived for existing franchisors who are re-registering their franchises provided that this is completed within a three-year grace period that the Malaysian Franchise Registrar has provided.

If a franchisor fails to re-register its franchise under the new system within the grace period, the Registrar can take a number of actions including issuing a notice of suspension and cancelling a franchisor’s registration, which can seriously impact or effectively end a franchisor’s business operations in Malaysia.

Next steps

Please get in touch with any member of our franchising team who would be happy to assist you with re-registering your franchise in Malaysia under the new law.

With thanks to Lee Lin Li, Head of IP & Technology, Tay & Partners, Malaysia; and Chong Kah Yee, Senior Associate IP & Technology, Tay & Partners, Malaysia for contributing this article.