Do you want to start a distributor business in Nepal but don’t know where to begin? Don’t worry, this article will show you how to obtain a distributorship.It is critical to understand what the terms Distributorship and Agent/Representative mean.
A distributor acts as a supplier between the manufacturer and the retailer. Foreign manufacturing companies, particularly in Nepal, appoint distributors. Foreign suppliers typically appoint a distributor for the entire country of Nepal, or for a specific territory, by entering into a detailed distribution agreement.
Similarly, the supplier can appoint agents, in which case the supplier is the principal and retains control over product sales and pricing.
Multinational brands typically enter the Nepal market through distributors or franchisees through an agreement. After the registration is completed they are regarded as a registered agent in Nepal.
In Nepal registering an agency is a requirement for its operation
The Agency Act of 2014 was enacted to prevent agents from taking unfair advantage. The goal of Agency Rule 219 is to carry out the Act’s objectives. The following registration procedures for agencies are outlined in both the Act and the Rule.
Application
Anyone who wishes to run an agency must submit an application for agency registration to the Director General of the Government of Nepal’s Department of Commerce. The applicant must include the principal’s name and address in the application. Furthermore, the applicant must commit to providing a transaction description every three months.
After registering with the Department of Commerce, the applicant is informed of the commission rate, among other things.
Registration
Following submission, the application is reviewed by the relevant authority at the DOC. If the applicant is found to be qualified, the relevant authority will grant permission upon receipt of the required deposit and agreement.
Renewal
The registration of an agency does not last indefinitely.
The agency should be renewed every year. Every year, before Chaitra (the last month of the Nepali calendar), an agency’s registration must be renewed.
Account submission
Every registered agent is required to present to the Director or Controller an account of all transactions every three months. The account must include details about the goods, the fare, the profit, and the sale price, among other things.
The consequences of an agency’s failure to register in Nepal
The agency must be registered in Nepal in order to conduct agency business. A transaction that is not registered is not only illegal, but also problematic and exposes the agent to legal ramifications.
According to the Nepali Agency Act, 2014 and Rule, 2019, failure to register an agency has the following consequences: – The government of Nepal may fine an agent working without registration up to Rs. 1000.
Agency transfer
The registered agent may transfer agency to another agent. To become a new agent, the applicant must submit an application to the Department of Commerce along with the required fee of Rs. 25 and a letter of consent from the principal and the original agent. If the agency is not transferred, the money will be refunded. If necessary, the Director or Controller delegated authority to the applicant.
The Nepali government can fine the agent and anyone else who violates the Act’s legal requirements with a Rs. 200 fine or bar them from acting as agents for two years.
Agents who violate the agreement made at the time of registration with key terms may face a fine of up to Rs. 500 or a five-year ban from acting as an agent.
As previously stated, the consequences of failing to register an agency include a fine and being barred from conducting agency business for an indefinite period of time.
By mutual agreement of the principal and the agent: A contract, like any other, can be terminated at any time. A contract, in fact, creates agency, which can be terminated by another contract.
By revocation
The principal may revoke the agent’s authority at any time by giving notice to the agent before the agent uses his or her power to bind the principal. If no notice is given, the principal is responsible for payment.
Revocation must be supported by substantial grounds. If a third party enters into a contract with the agent in good faith and without being aware of a revocation, this contract binds the principal years.
Renunciation of agency
An agent is not required to keep his agency against his will. Unless otherwise specified in the contract, the agent may voluntarily renounce agency by providing reasonable notice to the principal of his decision to do so. Because of the lack of notice, the principal must be compensated.
Renunciation must be supported by compelling reasons. A renounced agent is not entitled to compensation for services rendered.
The agency has arrived at and by the time the parties have completed their work. Unless otherwise specified in the contract, if the agent was hired for a specific task, the agency ends when the task is completed.
Agency closure
Termination of an agency by operation of law
This refers to an agency’s automatic termination as a result of the application of the law. Modes include
Termination of terms S. 61 (1) (d)
Whether or not the agency’s goal is met, when an agent is appointed for a fixed term, the agency terminates at the end of the terms.
By death or insanity S. 61(c) states that, unless otherwise stated in the contract, the agency terminates upon the principals or agent’s death or insanity.
Unless otherwise specified in the contract, the agency is terminated from this declaration if the principal is declared insolvent in accordance with S. 59(1). (f). Although it is acknowledged that the agent’s insolvency will burden the ICA and NCA, it is unclear what will happen in those circumstances.
Because the agency is insolvent, it has been removed from this declaration. Although it is recognized that the agent’s insolvency terminates the agency business, it is unclear in the ICA and NCA cases when the agent becomes insolvent.
Destroying the subject matter S. 59 (1) (g): – An agency established to handle a specific subject will be terminated by destroying the subject. For example, if the agency was established to sell a house and the house is destroyed by fire, the agency will be terminated.
However, the ICA and NCA acknowledge that the agent’s bankruptcy also ends the agency business.
Destroying the object S. 59(1) (g)
The destruction of the subject matter for which an agency was established means the end of that agency. For example, if the agency was established to sell a house and the house is destroyed by fire, the agency will be terminated.
For years, the firm has provided legal counsel in this matter. Please do not hesitate to contact us if you have any legal concerns at +9779849517735 or by email info@corporatelawyernepal.com
Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.
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