SOLE SELLING AND SOLE BUYING AGENTS

SOLE SELLING AND SOLE BUYING AGENTS

The expression “Sole Selling Agent” has not defined in the Companies Act.

Appointment of sole selling agents to require approval of company in general meeting – Section 294

No company shall, after the commencement of the Companies (Amendment) Act, 1960, appoint a sole selling agent for any area for a term exceeding five years at a time – Section 294(1)

If the company refuses or neglects to furnish any such information, the Central Government may appoint a suitable person to investigate and report on the terms and conditions of appointment of all the selling agents – Section 294(6) (b)

Penalty – Section 294(7)

If a company refuses or neglects___

     (a) to furnish the information required by the Central Government under Section 294(5)(a) or 394(6)(a), or

     (b) to produce to the person appointed under clause (b) of sub-section (5) or clause (b) of sub-section (6) any books and papers which are in its custody or power or otherwise to give to that person any assistance which it is reasonably able to give, the company and every officer of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and with a further fine of not less than five hundred rupees for every day after the first during which such refusal or neglect continues

Power of Central Government to prohibit the appointment of sole selling agents in certain cases. – Section 294AA

Where the Central Government is of opinion that the demand for goods of any category, to be specified by that Government, is substantially in excess of the production or supply of such goods and that the services of sole selling agents, will not be necessary to create a market for such goods, the Central Government may, by notification in the Official Gazette, declare that sole selling agents shall not be appointed by a company for the sale of such goods for such period as may be specified in the declaration.

(2) No company shall appoint sole selling agent of that company unless such appointment has been previously approved by the Central Government.

(3) No company having a paid-up share capital of rupees fifty lakhs or more shall appoint a sole selling agent except with the consent of the company accorded by a special resolution and the approval of the Central Government.

(4) Where any appointment has been made of a sole selling agent by a company before the commencement of the Companies (Amendment) Act, 1974 and the appointment is such that it could not have been made except on the authority of a special resolution passed by the company and the approval of the Central Government, if sub-section (2), sub-section (3) and sub-section (8), were in force at the time of such appointment, the company shall obtain such authority and approval within six months from such commencement; and if such authority and approval are not so obtained, the appointment of the sole selling agent shall stand terminated on the expiry of six months from such commencement.

(5) If the company in general meeting disapproves the appointment referred to in sub-section (3), such appointment shall, notwithstanding anything contained in sub-section (6), cease to have effect from the date of the general meeting.

Sole Buying or Purchasing Agents

The provisions of this section 294AA except those of sub-section (1), shall apply so far as may be to the appointment by a company of a sole agent for the buying or purchasing of goods on behalf of the company.

Prohibition of payment of compensation to sole selling agents for loss of office in certain cases – Section 294A

a) where the appointment of the sole selling agent ceases to be valid by virtue of sub-section (2A) of section 294;

 (b) where the sole selling agent resigns his office in view of the reconstruction of the company or of its amalgamation with any other body corporate and is appointed as the sole selling agent of the reconstructed company or of the body corporate resulting from the amalgamation;

 (c) where the sole selling agent resigns his office, otherwise than on the reconstruction of the company or its amalgamation as aforesaid;

   (d) where the sole selling agent has been guilty of fraud or breach of trust in relation to, or of gross negligence.

  (e) where the sole selling agent has instigated, or has taken part directly or indirectly in bringing about, the termination of the sole selling agency.

The compensation which may be paid by a company to its sole selling agent for loss of office shall not exceed the remuneration which he would have earned if he had been in office for the unexpired residue of his term, or for three years whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which his office ceased or was terminated.