Section 445.302. Escrow requirements.

When an escrow is imposed in connection with the registration or exemption of a franchise offering, the account shall comply with the following requirements:

(a)    Checks shall be made payable to the depository approved by the administrator.

(b)   The account  shall   be  established   in  a  bank   or  trust   company acceptable to the administrator, and the funds shall be kept and maintained in an account separate and apart from  the franchisor's business and personal accounts.

(c)     All proceeds so deposited shall  remain  the  property   of  the franchisee and shall not be subject to any liens or charges by the escrow agent, or judgments, garnishments, or creditor's claims against  the franchisor until released to the franchisor as hereinafter provided. This escrow is for the benefit of each franchisee in the amount   paid   by  each franchisee.

(d)  At the administrator's discretion, a statement indicating the status of the escrow shall be furnished by the   bank   or  trust   company  to  the administrator.

(e)   A trust or escrow agreement shall be entered into between the bank or trust company, and the franchisor, which shall state that its purpose is to protect the franchisee or subfranchisor and  shall  authorize  the administrator to inspect the records of the bank or trust  company,  as trustee, relating thereto,  and  shall   state that, upon  order  of  the administrator or a court of  competent   jurisdiction,  the trustee shall release and pay over the funds, or a portion thereof, to the franchisor, subfranchisor, or franchisee, as directed.

(f)        The  department,    by   its    administrator,   shall   execute    an acknowledgment on the face of  each  escrow  or  trust   agreement.  This acknowledgment  indicates  approval  on  the  form  and  content  of  the agreement, but shall not be construed  to  make the   department   a   party thereto.

History: 1979 AC.