Section 16-37-5 - Impoundments(a) The director may order the impoundment of franchise fees if the director finds that such requirement is appropriate to protect the prospective franchisee.(b) Operation of impoundment. When an impoundment is imposed in connection with the filing of an offering circular, one hundred per cent of franchisee fees and all other funds paid by the franchisees or subfranchisors for any purpose shall within forty-eight hours of the receipt of such funds, be placed with the depository until the director takes further action pursuant to subsection (e) of this section. All checks shall be made payable to the depository.(c) Purchase receipts. When an impoundment is imposed, the franchisor shall deliver to each franchisee or subfranchisor, a purchase receipt, in a form approved by the director. Such purchase receipts shall be consecutively numbered and prepared in triplicate and the original given to the franchisee or subfranchisor, the first copy to the depository together with the payment received and the second copy to the franchisor.(d) Depository. Funds subject to an impoundment shall be placed in a separate trust account with a bank or a fiduciary company authorized to do business in this State and acceptable to the director. A written consent of the depository to act in such capacity shall be filed with the director.(e) Release of impoundments. The director shall authorize the depository to release to the franchisor such amounts of the impounded funds applicable to a specified franchisee (or subfranchisor) upon a showing that the franchisor has fulfilled its obligations under the franchise agreement, or that for other reasons the impoundment is no longer required for protection of franchisees. An application for an order of the director authorizing the release of impoundments to the franchisor shall be verified and shall contain the following:
(1) A statement of the franchisor that all required proceeds from the sale of franchises have been placed with the depository in accordance with the terms and conditions of the impoundment.(2) A statement of the depository signed by an appropriate officer setting forth the aggregate amount of impounded funds placed with the depository.(3) The names of each franchisee (or subfranchisor) and the amount held in the impoundment for the account of each franchisee (or subfranchisor).(4) A statement by the franchisee that the franchisor has performed its obligations under the franchise contract.(5) Such other information as the director may require in a particular case.[Eff. 1/1/75; am 3/30/79; am and ren § 16-37-5, 7/30/81] (Auth: HRS § 482E-8) (Imp: HRS § 482E-8)