SOLE SELLING

PRESENTS….

STUDENTS

ADITI BANSAL

(IB 2K 11-02)

SURYA AGRAWA

L(IB 2K 11-57)

MEANING• “Sole Selling Agent" has not been defined in the

Companies Act, 1956. However, it may be defined as an individual, firm, or body corporate, who or which has been appointed by a company as an agent with exclusive rights to sell the specified products of the company in a specified area.

• The relationship of the company and the sole selling agent so appointed is that of a principal and an agent and is governed by the provisions contained in the Indian Contract Act, 1872 regarding agents.

• Sole Selling Agents are not employees of company

Section 294A :- Appointment of a sole

selling agentA Body corporate or firm or individual can be appointed as sole selling agent. The company can’t appoint sole selling agent for more than 5 years at a time. Sole selling agent can be appointed for some products or whole category of products by the company.

Appointment should be subject to the approval of shareholders

If appointment is rejected by the shareholders, it would invalid from the same period.

disclosure of material information.

clause in agreement.

Procedure for

appointment of sole selling agents.

1. Call a meeting of the BOD determine the name of the sole selling agent to be appointed. If the paid-up share capital > 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.

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).

3. See that the terms and conditions of appointment or reappointment do not contain the tenure exceeding 5 years, at a time.

1. demands of product > supply2. should not have substantial interest (5 lakhs or 5 % of the paid up capital.) 3. at the time of appointment the paid up capital >50 lakhs, 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 AA)Restriction on appointment.

C.G. POWER TO PROHIBIT THE APPOINTMENT OF SSA

(SECTION 294AA)Demands of product > supplyCG 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.-Based on this power, CG has prohibited the appointment of sole selling agents for sugar, vanaspati, cement, paper etc at different times.

-As per Section 294AA, the Central Government hasbeen given power to approve or to refuse to approve the appointment of a sole selling agent, who has asubstantial interest in the company. – Suchappointment should be previously approved by CG-As per Section 294AA (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-The term "substantial interest" has been defined forthis purpose in Explanation (b) to sub-section (8) ofsection 294AA.

Company's Duty in Investigationto produce all books and records called for andto provide all types of assistance to the personFor any breach, the company and every officer of the company who is in default shall be punishable with fine which may extend to rs.50,000 and with a further fine of not less than 500 rs/day after the first during which such refusal or neglect continues.

DUTIES OF A SECRETARY

It is the duty of the Secretary to ensure that the appointment of sole selling agent is not

prohibited by CG, to ensure that the terms and conditions are as per the

Indian Contract Act, 1872, to place the proposal before BOD, the company (for passing appropriate resolutions) and CG

(for approval) at proper times as per the provisions of this Act etc.

Paid-up capital structure ofthe company appointing

sole selling agents

Statutory requirements forthe appointment of sole

selling agents

Where the company's paid up share capital is less than rupees fifty lakhs.

Ordinary resolution – Section 294(2)

Where the company's paid-up share capital isrupees fifty lakhs or more.

Special resolution and approval of the CentralGovernment – Section 294AA(3)

Where the company's paid-up share capital isless than rupees fifty lakhs but the proposed sole selling agent has substantial interest in thecompany.

Previous approval of the Central Government and consent of the company in general meeting by ordinary resolution – Section 294AA(2) readwith 294(2)

Where the company's paid-up share capital isrupees fifty lakhs or more and the proposed sole selling agent has substantial interest in thecompany.

Previous approval of the Central Government and consent of the company in general meeting by ordinary resolution – Section 294AA(2) and (3).

The provisions of the Act in regard to appointmentof sole selling agents may be tabulated as under:

POWERS OF THE CENTRAL GOVERNMENT

TO INVESTIGATE TERMS OFAPPOINTMENT

-Section 294(5) provides that -(a) If terms and conditions are prejudicial to company(b) 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 same.

(c)CG may make suitable variations in those terms and conditions-

If a company has more than one selling agent in any area and it appears to CG that it may not be necessary, it may direct the company to provide necessary information to declare any of them as sole selling agent

Based on the information given or if the company

refuses to do so, based on the report of the

investigator appointed for this purpose, CG may

declare, if found necessary that one of them is the sole

selling agent

RE-APPOINTMENT OF SOLE SELLING

AGENTSThe term 'appointment' in

relation to sole selling agent and sole buying or purchasing agent includes reappointment.

approved by special resolution in general meeting and by CG when

the paid up capital > rs.50 lakhs or more.

given salary or  commission for the task taken.

appropriate to the services rendered.

NO COMPENSATION TO SOLE SELLING AGENT FOR LOSS OF OFFICE

-Section 294Anot

approved by members in

general meeting

Resignation due to

reconstruction or

amalgamation of the

company

and is appointed as

the sole selling agent

of the reconstructed company or of

the body corporate

resulting from the

amalgamation

when he

resigns

when he is guilty of

fraud etc

when he had

brought about his

own loss of office by

his conduct

SECTIONS OF COMPANIES ACT 1956

PROVISIONS OF COMPANIES ACT WHICH HAS BEEN

DELETED IN COMPANIES BILL 2012

294 APPOINTMENT OF SOLE SELLING AGENT TO REQUIRE APPROVAL OF COMPANY IN GENERAL MEETING

294 A PROHIBITION OF PAYMENT OF COMPENSATION TO SOLE SELLING AGENT FOR LOSS OF OFFICE IN CERTAIN CASES

294 AA POWER OF CENTRAL GOVERNMENT TO PROHIBIT THE APPOINTMENT OF SOLE SELLING AGENT IN CERTAIN CASES

MAJOR OMISSION AND DELETION IN UPCOMING COMPANIES ACT 2013

SECTIONS OF COMPANIES ACT 1956

PROVISIONS OF COMPANIES ACT WHICH HAS BEEN

DELETED IN COMPANIES BILL 2012

294 APPOINTMENT OF SOLE SELLING AGENT TO REQUIRE APPROVAL OF COMPANY IN GENERAL MEETING

294 A PROHIBITION OF PAYMENT OF COMPENSATION TO SOLE SELLING AGENT FOR LOSS OF OFFICE IN CERTAIN CASES

294 AA POWER OF CENTRAL GOVERNMENT TO PROHIBIT THE APPOINTMENT OF SOLE SELLING AGENT IN CERTAIN CASES

MAJOR OMISSION AND DELETION IN UPCOMING COMPANIES ACT 2013

GUIDED BY

MISS. APARNA

MAM