8-2416. Sale, transfer or assignment of dealership, notice and limitations; disapproval procedure; duties of manufacturer or distributor; appointment of successor.
8-2416
8-2416. Sale, transfer or assignment of dealership,
notice and limitations;
disapproval procedure; duties of manufacturer or distributor; appointment of
successor.
(a) A vehicle dealer shall not transfer, assign or sell a franchise
agreement or interest in a dealership to another person unless the dealer first
gives written notice to the first or second stage manufacturer or distributor
of the dealer's decision to make such transfer, assignment or sale. The dealer
shall provide the first or second stage manufacturer or distributor with any
completed application forms and related information generally utilized by the
first or second stage manufacturer or distributor to conduct its review of
prospective new vehicle dealers, and a copy of all agreements regarding the
proposed transfer, assignment or sale.
(b) The first or second stage manufacturer or distributor shall send a
letter by certified mail to the dealer within 60 days of receipt of the
information specified in subsection (a). The letter shall indicate any
disapproval of the transfer, assignment or sale and shall specifically set
forth the reasons for the disapproval. If the first or second stage
manufacturer or distributor does not
respond by letter within the 60-day period, its consent to the proposed
transfer, assignment or sale is deemed to have been granted. A first or second
stage manufacturer or distributor shall not arbitrarily or unreasonably
withhold approval of the transfer, assignment or sale of a franchise agreement
or an interest in a dealership.
(c) Within 90 days after receipt of a notice of disapproval as provided in
subsection (b), the new vehicle dealer may file a complaint with the director
with respect to the first or second stage manufacturer or distributor's failure
to approve the proposed transfer, assignment or sale. When such a complaint
has been filed, the director shall inform the first or second stage
manufacturer or distributor that a timely complaint has been filed and a
hearing is required in accordance with the provisions of K.S.A. 8-2411 and
amendments thereto, to determine whether good cause exists to disapprove the
transfer, assignment or sale. A disapproval shall not be final until the
director or the director's designee makes a final determination as to good
cause.
(d) A first or second stage manufacturer or distributor shall not fail or
refuse to approve the transfer, assignment or sale of the business and assets
of a new vehicle dealer, or refuse to continue the franchise agreement with the
prospective transferee after the holding of a hearing on the complaint if the
director or the director's designee determines that good cause does not exist
for the first or second stage manufacturer or distributor to fail or refuse to
approve such transfer, assignment or sale. The burden of proof shall be on the
first or second stage manufacturer or distributor to show that the disapproval
of the transfer, assignment or sale was with good cause. Material factors to
be considered may include, but are not limited to: (1) Whether the basic
financial and facility requirements of the franchise agreement will be met by
the proposed transfer, assignment or sale;
(2) whether the proposed purchaser, transferee or assignee is capable of
operating, managing and supervising such business; and
(3) the extent to which the refusal to approve will have a substantial and
adverse effect upon the dealer's investment or return on investment.
(e) The first or second stage manufacturer or distributor shall have a right
of first refusal to acquire the new vehicle dealer's assets or ownership in the
event of a proposed change of all or substantially all of the dealer's
ownership, or the transfer of all or substantially all of the new vehicle
dealer's assets, if all of the following are met: (1) The first or second stage
manufacturer or distributor notifies the dealer in writing within the 60-day
limit established under subsection (b) of its intent to exercise its right of
first refusal;
(2) the exercise of the right of first refusal will result in the dealer and
dealer's owners receiving consideration, terms and conditions that either are
the same as or greater than that which they have contracted to receive in
connection with the proposed change of all or substantially all of the dealer's
ownership, or the transfer of all or substantially all of the new vehicle
dealer's assets;
(3) the proposed change of all or substantially all of the dealership's
ownership or the transfer of all or substantially all of the new vehicle
dealer's assets does not involve the transfer of assets or the transfer or
issuance of stock by the dealer or one or more dealer owners to a designated
family member or members, including the spouse, child or grandchild, spouse of
a child or grandchild, brother, sister or parent of the dealer owner, or one or
more dealer owners, or to a qualified manager, or to a partnership or
corporation controlled by any such person; or to a trust arrangement
established or to be established for the purpose of allowing the new vehicle
dealer to continue to qualify as such a dealer, so long as the new vehicle
dealer continues to qualify as such pursuant to the first or second stage
manufacturer or distributor's standards, or provides for the succession of the
franchise agreement to designated family members or qualified management in the
event of the death or incapacity of the dealer or its
principal owner or owners; and
(4) except as otherwise provided in this subsection, the first or second
stage manufacturer or
distributor agrees to pay the reasonable expenses, including reasonable
attorney fees, which do not exceed the usual, customary and reasonable fees
charged for similar work done for other clients, incurred by the proposed owner
or transferee prior to the first or second stage manufacturer or distributor's
exercise of its right of first refusal in negotiating and implementing the
contract for the proposed change of all or substantially all of the dealer
ownership, or the transfer of all or substantially all of the new vehicle
dealer's assets. No payment of expenses and attorney fees shall be required if
the dealer has not submitted or caused to be submitted an accounting of those
expenses within 20 days of the dealer's receipt of the first or second stage
manufacturer or distributor's written request for such an accounting. Such an
expense accounting may be requested by a first or second stage manufacturer or
distributor before exercising its right of first refusal.
(f) A new vehicle dealer and its owners may appoint by trust, will or any
other
valid written instrument a successor to the owner's interest in the franchise
agreement upon the owner's death or incapacity, subject to the following
procedures: (1) Unless the first or second stage manufacturer or distributor
has good
cause to refuse to approve the succession, the successor may succeed to the
ownership of the new vehicle dealer under the existing franchise agreement if:
(A) Within 90 days of the owner's death or incapacity, the successor gives
written notice of the successor's intent to succeed to ownership of the new
vehicle dealer and its franchise agreement; and
(B) the successor agrees to be bound by all the terms and conditions of the
franchise agreement with the prior new vehicle dealer.
(2) Upon request, the successor shall promptly provide the first or second
stage manufacturer or distributor evidence of the successorship appointment, as
well as personal and financial information reasonably necessary to determine
whether the succession should be approved by the first or second stage
manufacturer or distributor.
(3) If a first or second stage manufacturer or distributor believes that
good cause exists to refuse to approve the intended succession under subsection
(f)(1), then the first or second stage manufacturer or distributor shall serve
the new vehicle dealer and named successor written notice of refusal to approve
the intended succession within 60 days of its receipt of the notice of the
intended succession, or within 60 days of receiving the information requested
under paragraph (f)(2), whichever is later. The notice must contain specific
grounds for the refusal to approve the succession. In the event of such a
refusal the new vehicle dealer or successor may file a complaint as provided
under subsection (c),
and the matter shall then proceed to hearing in the manner and on the same
basis as the disapproval of a transfer, assignment or sale.
(4) If notice of refusal to approve the intended succession is not served
within 60 days upon the intended successor, the successor may continue the
franchise agreement and the successor shall thereby be deemed approved by the
first or second stage manufacturer or distributor.
(g) It shall be a violation of this act for a first or second stage
manufacturer or distributor, or anyone on their behalf, to exercise a right of
first refusal or other right to acquire the business of the new vehicle dealer
or a franchise agreement as a means to influence the consideration or other
terms offered by a person in connection with the acquisition of the business
or franchise agreement or to influence a person to
refrain from entering into, or to withdraw from, negotiations for the
acquisition of the business or franchise agreement.
History: L. 1980, ch. 36, § 16; L. 1983, ch. 43, § 4;
L. 1998, ch. 71, § 2; July 1.