Before enactment of the first separate Agency Act, in 2014 BS in Nepal, the Contract of agency was operated by the Agency Istihar (Law) of 1992 BS. The Agency Act, 2014 is still in operation and for clarification of the provisions, the Agency Rules 2019 has made in 2019 BS. In addition to this Act and Rule, the Contract Act, 2056 has also incorporated some provisions to deal with the law of agency.
At present in Nepal, the Contract Act, 2056 is the main legal framework to govern the matter of agency. The Agency Act, 2014 is old one and it has comprised only 11 section which are relating only to the agent, registration and renewal of agency, punishment. It does not able to comprise the modern aspects of agency. The Contract Act, 2056 is a new one and it deals with several provisions of agency, alone with other forms of contract under the chapter 8, it deals with definition of agency, principal, agent, and sub-agent, and makes provisions relating to the rights and duties of them, as well as the modes of creation and termination of agency.
Procedure of Registration of an Agency
The Agency Act, 2014 B.S. was introduced with the object to restrict the agent from making unfair advantage in the sale of goods and to regulate, control such activities and makes other relevant provisions to the effect. The Agency Rule, 2019 is made for obtaining the objectives of the Act. According to the both Act and Rule procedure of registration of an Agency is given below:
- Application: The person who wants to operate the business of agency he has to apply for the registration of an agency to the Director General of the Department of Commerce, Government of Nepal. He has to mention Name and Address of the principal in the application. Further, he has to commit for providing description of transaction within every three months. He is restricted to make any undue profit other than prescribed commission. He has to pay application registration fee.
- Registration: The Director General of the Department of Commerce can be register the agency after receiving the application if there has been all required information in the application to register the agency. The Director can fix terms and conditions in the registration while allowing the agency. In case, where the application is not approved, the applicant can take back the paid amount. The registration must be renewed before the end of every chaitra month under the Nepalese calendar to be valid.
- Submission of Account: Every registered agent has to submit account of transaction under taken on every three months at the office of Director General. The account has to include description or goods, worth, profit, sale rate and so on. From this, the department receives information about the transaction.
- Transfer of Agency: The registered agency can be transferred from one to another. For this purpose, the person willing to be new agent has to submit the consent letter of the principal and application with Rs.25 at the department of commerce. If the Director found appropriate, agency can transfer 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 numbers of difficulties as well as makes liable for the punishment to the agent. According to the Nepal Agency Act, 2014 and Rule 2019 the effects of the non-registration of agency can bear following consequences;
- Punishment of fine: Government of Nepal can punish the agent working without registration, with the punishment of fine up to Rs 1000.
- Prohibition to work as an agent: Government of Nepal may also punish the agent working contrary to legal provision of the Act with the fine Rs 200. or prohibits to work as agent for two years.
- Violating the essential terms: 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 disqualifies to the business of agency for the certain period.