Procedures for registration of agency in Nepal

In Nepal, registration of agency is compulsory for running agency business. .The agency Act, 2014 was introduced with the object to restrict the agent from making unfair advantage. The Agency Rule, 219 is made for obtaining the objectives of the Act. According to both the Act & Rule, procedure of registration of agency is given below:

  1. Application: – The person who wants to operate the business of agency, he has to apply for the registration of agency to the Director General of the Department of Commerce of Government of Nepal. The applicant has to mention name and address of the principal in the application. Further, the applicant has to commit for providing description of transaction within every three months. The applicant after getting registration in the Department of Commerce, is restricted to make any undue profit other than prescribed commission. The rate of commission is also specified during the application.
  2. Registration: – After the application is submitted it is checked by concerned authority at the DOC. If it is found that the applicant is eligible, the concerned authority will give permission after taking necessary deposit and agreement.
  3. Renewal: – Registration of agency is not forever. Agency should be renewed every year. Registration of Agency has to be renewed before the expiry of the month Chaitra(last month of Nepali Calendar)  every year.
  4. Submission of account: – Every register agent has to submit account of transaction undertaken in every three months before the Director cum Controller. The account has to include description of goods, fare, profit, sale rate and so on.
  5. Transfer of agency: – The registered agent can transfer agency to another. For this purpose, the person willing to be new agent has to submit the letter of consent of the principal as well as the original agent and application with required amount (Rs. 25) at the Department of Commerce. The amount is refundable in case of non-transfer of agency. The Director cum Controller if finds appropriate transfers agency to the applicant.

Effect of non-registration of agency in Nepal

The agency must be registered to operate the business of agency in Nepal. The transaction without having registration is not only illegal but also creates a number of difficulties as well as makes liable for the punishment to the agent. According to the Nepalese Agency Act, 2014 and Rule, 2019 the effects of the non-registration of agency pursuant to the following consequences: –

  1. Govt. of Nepal can punish the agent working without registration with the punishment of fine up to Rs. 1000
  2. Govt. of Nepal may also punish the agent and any other person working contrary to legal provision of the Act with fine Rs. 200 or prohibits to work as agent for two years.
  3. The agent violating the contract which has been made the time of registration with essential terms is subject to punishment of fine up to Rs. 500 or restriction to work as agent for up to five years.

As mentioned above, the effects of non-registration of agency makes one punishable for fine and makes him disqualified to the business of agency for the certain period.

Termination of Agency

Termination of agency implies the end of the relationship between the principal and agent. There are several modes of termination of agency. The NCA, 2056 has made some provisions in this regard under Sections 61, 62 & 64. These provisions have not described all the modes of termination of agency. An agency may be terminated in any of the following wags: –

(A) Termination of Agency by acts of the parties   

An agency to be terminated according to the desire or the act of the principal and agent is regarded as termination of agency by act of the parties. Fall under this the following modes:-

  1. By agreement: – An agency, like any other contract, can be terminated at any time by the mutual agreement between the principal and agent. In fact, an agreement brings out agency which can be terminated by another agreement.
  2. By revocation: – The principal may revoke the authority of the agent at any time, by giving notice to the agent before the agent has exercised his authority to bind the principal. Non service of notice binds the principal for compensation. The revocation should be based on reasonable ground. If third party enters into contract with agent with good faith without knowledge of revocation, this contract binds the principal.
  3. Renunciation by the agent: – An agent is also not bound to continue agency against his will. Unless otherwise mentioned in the contract if the agent voluntarily decides not to continue agency, serving a reasonable notice to the principal in time he can renounce agency. Lacking of notice makes it necessary to compensate the principal. The renunciation must be based on reasonable ground. The agent who renounces the agency has no right to claim remuneration for his performed work.
  4. By completion of work: – When the parties perform their respective duties, the agency comes to and. Unless otherwise  mentioned in the contract, if the agent has been appointed for any specific work, the agency is terminated as soon as the work is completed .

(B) Termination of agency by operation of law: 

An agency which gets automatically terminated due to application of law is known as termination of agency by operation of law. It includes the following modes: –

  1. By expiry of time S. 61 (1) (d): – Where an agent has been appointed for a fixed term the expiration of the terms puts an end to the agency, whether the purpose of the agency has been accomplished or not.
  2. By death or insanity s.61(c): – Unless otherwise mentioned in the contract, the agency is terminated with the time of the death or insanity of the principal or the agent.
  3. By insolvency of the principal S.59(1) (f): – Unless otherwise mentioned in the contract, if the principal is declared insolvent, the agency is terminated from this declaration. It is not clear in the case of insolvency of the agent in the ICA & NCA but it is also accepted that the insolvency of agent also puts an end the agency business.
  4. By destruction of the subject matter S.59 (1) (g): – An agency which is created to deal with certain subject matter will be terminated by the destruction of that subject matter. For example, where the agency was created for the sale of a house and the house is destroyed by fire, the agency ends.
  5. By dissolution of a company S. 59(1) (g):- A company being legal person comes to end when it is dissolved or liquidated. Unless otherwise mentioned in the contract, the agency is automatically terminated when the principal or agent is a company is liquidated.
  6. By principal or agent becomes alien enemy: – If the principal and agent are nationals of two different countries and a war breaks out between the two countries, the contract of agency is terminated. The outbreak of war renders the continuance of the principal and agent relationship unlawful because an alien enemy.
  7. By change of law: – Due to the change of law, if the works under contract of agency become impossible to perform subsequently, the agency put an end.