Appointment of sole-selling agents

Practicing Company Secretary/Tax Consultant

What is the procedure for sole-selling agents u/s 294 of the Companies Act ? Can a Indian company appoint a sole-selling agents in foreign country ? The approval of Central Government is available for the foreign entitry ?

Following things are clear to me, what about the others ?

-The sole-selling agent to be appointed for maximum period of 5 years.

-Sole-selling agent should have the appropriate experience.

-Application in Form-I alongwith requisite fee to be made through e-filing.

-Application will be sent to MCA, New Delhi for its approval.

-The sole-selling agency will be exclusive for the particular area.

- MoA/AoA of the company should have the provision for appointment of sole-selling agent.

- The following documents are required to be attached alongwith the application :

    a) sole-selling agreement on stamp paper.

    b) previous approval for sole-selling agreement.

   c)  breif descripttion of the agent to be appointed.

  d)  Last 3 years balance sheet of the sole-selling agent and the appointee company.

  d) Copy of Special resolution passed in general meeting.




YES Laxmikant, an Indian company can appoint a sole selling agent in a foreign country, provided that it has taken a prior approval from Reserve Bank of India (RBI). FURTHER,I think, there is no need to take the permission from foreign government. FOR YOUR CLARITY I AM GIVING THE EXTRA DETAILS AS FOLLOWS: Appointment of Sole Selling Agent: Section 294 and 294AA of the Companies Act, 1956 regulate the appointment of sole selling agents. These sections provide that: 1. No company shall appoint a sole selling agent for any areas for a term exceeding 5 years at a time and the term may be extended for another period but not exceeding 5 years on each occasion. [Section 294(1)]. 2. The Board of Directors may appoint a sole selling agent but only subject to the condition that the appointment shall cease to be valid if it is not approved by the company in the first general meeting held after the date on which the appointment is made. In case, the company in general meeting, as aforesaid, disapproved the appointment, it shall cease to be valid with effect from the date of that general meeting [Section 294(2) and (2A)]. 3. 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 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. 4. No company shall appoint any individual firm or body corporate, who or which has a substantial interest in the company as sole selling agent of that company unless such appointment has been previously approved by the Central Government. 5. A company having a paid-up share capital ofRs.50 lakhs or more shall not appoint a sole selling agent except with the consent of the company accorded by a special resolution and the approval of the Central Government. 6. The Central Government may vary the terms and condition of appointment of a sole selling agent if those are found to be prejudicial to the interest of the company. 7. In case a company has more than one selling agents in any area, the Central Government may declare any one of such agents as the sole selling agent for such area after obtaining from the company and considering the terms and conditions of appointment of the selling agents. Procedure for appointment of sole selling agents: 1. Call a meeting of the Board of Directors and determine the name of the sole selling agent to be appointed. If the paid-up share capital of the company is less than Rs.50 lakhs and the appointee does not have a substantial interest in the company, the Board may also resolve to appoint him as sole selling agent subject to the approval of the general body meeting. Date for the general meeting may also be fixed by the Board in its meeting, appointing the sole selling agent. 2. In case the appointee either has a substantial interest in the company, or the paid- up share capital of the company is Rs.50 lakhs or more, application for the approval of the Central Government should be made in Form 1 of the Companies (Appointment of Sole Agents) Rules, 1975. 3. See that the terms and conditions of appointment or reappointment do not contain the tenure exceeding 5 years, at a time. 4. Issue notices for holding the general meeting. Where the paid-up share capital of the company is Rs.50 lakhs or more, it shall require passing a special resolution; otherwise an ordinary resolution shall be sufficient. 5. Forward three copies of the notices and a copy of the proceedings of the general meeting to the Stock Exchange(s) with which the shares of the company are listed (if listed). 6. If the proposed sole selling agent is to be appointed in a foreign country, obtain the prior permission of the RBI REPLY Yours KARAN


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