Sole selling agent :-

An appointment made by company for appointing a distributor which would be the sole principal for handling the dealings of a particular area is called as a sole selling agent. These provisions applies to all companies.

Section 294A :-

Appointment of a sole selling agent

1. Appointment should be subject to the approval of shareholders :- In case,the appointment is rejected by the shareholders, it would invalid from the same period.
2. As sole selling agent is an important agenda, so proper explanation with disclosure of material information should be given to shareholders.
3. There must be clause in agreement that appointment is subject to approval of shareholders. In case, appointment agreement doesn’t provide this clause, the agreement is void-ab-initio.
4. A Body corporate or firm or individual can be appointed as sole selling agent.
5. The company can’t appoint sole selling agent for more than 5 years at a time. And renewal of the appointment also won’t exceed 5 years at a time.
6. Sole selling agent can be appointed for some products or whole category of products by the company.

Section 294 AA

Restriction on appointment

1, where demands of product is in excess of the supply, then there is no need to appoint sole selling agent. As the market already exist for the products.

2. Sole selling agent should not have substantial interest at the time of appointment. Substantial interest means 5 lakhs or 5 % of the paid up capital.

3. Where at the time of appointment of the agent, the paid up capital of the company has 50 lakhs or more, it should be approved by the special resolution of shareholders and central govt. In case of non-acceptance at any ground would lead to invalid appointment.

Section 294

Power of the central government

1. Investigation by the central government
   1. If there is good reason to believe that appointment of sole selling agent is prejudice to the interest of the company, it may call for information.
   2. In case, company doesn’t oblige the order, CG may appoint inspector for the same.
   3. The central government may provide variation in terms and condition of the appointment.
2. The company or every person who is in default is liable with fine upto Rs.50,000 and 500/day til the default continues.
3. The central govt. can not terminate the sole selling agency in any case. It can only make an order for variation in terms of appointment.

Regards

Renu