Here are some points on which will come in handy for the chapter Sole Selling Agents of CA Final Law.
Who is a Sole Selling Agent (SSA)?
The one who is given an exclusive right to sell the goods of the company to the exclusion of all others including the company itself.
Why to appoint SSA?
- To create a market.
- To increase the demand of the product.
What are the “Appointment” conditions?
- Appointment must be conditional.
- Appointment must be approved in the first GM held, after his appointment, by the shareholders.
What if SSA makes a monopoly even when Company has established its market?
That’s why there is a tenure of 5 years of SSA as directed by Central Government.
What if SSA is appointed by the insider to fetch personal profits?
That’s why Central Government prohibit the appointment of SSA when it is of the opinion that
- Demand > Supply, or
- Service of SSA is not necessary to create a market.
What if SSA having substantial interest in the company uses his right to fetch personal profits?
Due to this factor, Central govt. has laid down restrictions where there is a substantial interest of SSA in the company, as follows:
- Previous approval of Central govt. when person applying for the right holds Paid up capital of either 5% or Rs. 5 Lakhs.
- Approval of Central govt. + Special Resolution must be passed if paid up capital of the company is Rs. 50 Lakhs or more.
What will be compensated to SSA in case of non-approval of his appointment in AGM, during amalgamation or by his voluntary resignation?
Voluntary resignation during amalgamation or otherwise – No compensation.
Non-approval in AGM – Only on which work has been done by SSA.
Company fails to bring resolution before shareholders in AGM – Yes, because there is a breach of duty on the part of Board of Directors.
What will be the amount of compensation?
Unexpired tenure’s salary with a limit of 3 years’ “salary” where salary means average of the salaries received by SSA before resignation with a limit of 3 years.
P.S. - Kindly point out misstatement, if any.
Source: https://fundspedia.com/sole-selling-agents-summary/
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