The commercial agency in Saudi Arabia is subject to specific legislation, regulations, and laws, and requires formal contracts that define the rights and duties of the companies concerned. Global business partnerships.
Due to the importance of this topic, we are in this article where we will talk extensively about the commercial agency, as well as the types of commercial agency contracts and the terms and conditions of the commercial agency in Saudi Arabia ………
What is a commercial agency?
The commercial agency is defined as every contract that takes place with the original company or whoever replaces it in the main country to carry out the company’s commercial business, and it makes no difference that the person in charge of the agency is an agent or distributor in any form of the agency, and that is in exchange for a fee or some privileges that the agent gets. This agent must be a holder of the Saudi nationality, whatever the capacity of this agent, whether he is a natural or a legal person. As for the companies that carry out agency work, the capital that was put in place for the work must be Saudi, as well as everyone who works in the company from managers and members of the board of directors. They must all be of Saudi origin.
What is the commercial agent?
A commercial agent is every person who is responsible for selling a specific commodity or doing a service but in the name of the company that gave him the power of attorney in return for a fee that the agent gets.
Types of commercial agency contracts in Saudi Arabia
There are many types of commercial agency contracts in Saudi Arabia
First: the commercial franchise
It is a contract whereby a franchise is granted to a person, and this allows him to use one of the technical rights or intellectual property rights in order to sell or produce a specific commodity, but this is in favor of the brand that gave him this privilege.
(for information about commercial contract law in KSA .)
Second: the commercial agent
It is the company that sells products or performs the services of another company but in return for money or a specific percentage of the company’s profits.
Third: distribution
It is a company that sells products for its own account.
Fourth: Service contracts
They are contracts that are concluded once the will of the contractor and his agreement is directed to perform a specific work for the company for the purpose of obtaining a material profit, and this is represented in transportation contracts and other contracts.
Fifth: internal distribution
It is the contract according to which the Saudi merchant contracts with any Saudi company or factory to sell their products.
Terms of commercial agency in Saudi Arabia
- First, there must be a commercial register that matches the agency’s activity.
- All capital of Saudi companies must be fully Saudi.
- That all directors and members of the Board of Directors have Saudi nationality.
- It also includes within the conditions of the commercial agency in Saudi Arabia that every person who contracts with a commodity or a specific company or on behalf of this company in his country in order to carry out the business of the company must take care of all matters of maintenance and spare parts.
- The agent must also commit to providing all the spare parts that the consumer always asks about, in addition to securing maintenance for these products.
- In the event that the two parties to the agency contract are Saudis, the contract must be authenticated by the Chamber of Commerce and Industry in the Kingdom.
- If one of the parties to the contract is a foreign person, then the contract is documented by the Ministry of Foreign Affairs, the Saudi Embassy, or the Chamber of Commerce and Industry, as mentioned.
- The contract must be concluded with the original company or its representative in the original country because it is not permissible to enter a mediator from outside the country.
- The names and types of commodities, products, and services provided must be mentioned in detail in the agency contract.
- Determining a specific duration of the agency and the manner in which the agency will be renewed or terminated.
- If the company is foreign, the name of the company must be stated in Arabic and English without any abbreviation.
- The absence of any dispute between the two parties before the competent government authorities.
- If the contract is written in a foreign language, it must be translated into Arabic.
- That both parties sign the contract.
To Know How to start a business in KSA.
Documents required for the commercial agency
- State the real name of the agent.
- Mention the nationality held by both parties.
- Mention the products and services agreed upon in the contract.
- And also all the rights and obligations that both the agent and the principal must abide by, as well as the agent’s place of work.
How to register a commercial agency in Saudi Arabia?
- You must enter the website of the Ministry of E-Commerce.
- You will see three types of services: electronic services, commercial agency services, and agency registration services.
- You must choose an agency registration service.
- Then you log in to the account by typing the username and password.
- Fill in the required data and add all documents related to the agency.
- Click on Submit until the application is reviewed by the Ministry and approved.
To more information about Registration of commercial agency in KSA .
A specialized commercial lawyer to register a commercial agency application in Saudi Arabia
If you have a business or corporate dispute and want to resort to commercial litigation, do not hesitate to contact the commercial system experts at Al Othman Law Firm. The experience of Al Othman’s lawyers extends for more than 15 years in commercial cases, and the expertise of their staff of consultants exceeds more than 22 years in the Saudi commercial systems. as Al Othman includes the best commercial lawyers in Saudi Arabia and Riyadh
Explanation of the commercial agency system in Saudi Arabia
- One of the most important features of the commercial agency system in Saudi Arabia is that non-Saudis may not enjoy this system.
- Saudi agents must also be registered with the Ministry of Commerce and Industry in a special register.
- It also includes penalties for anyone who violates the system, which is not less than a fine of 1000 riyals and not more than 5000 riyals.
- The fees required for registration are 50 riyals for merchants, and companies, it is 100 riyals.
Obligations of the commercial agent in Saudi Arabia
The commercial agent’s obligations include the following:
- He must apply to the real estate registry office, located in the agency area, within one month from the date of issuance of the registration certificate.
- In the event of any amendments to the data mentioned, the commercial agent must submit an application for amendment, but after clarifying the reason, within one month from the date of issuance of the registration certificate.
- The commercial agent shall provide any necessary spare parts and any maintenance while ensuring quality.
- He must record all his documents such as official papers, contracts, or invoices, in addition to his name, address, type of agency, region and registration number in the Commercial Agencies Register.
- He must cooperate with men to control violations from the Ministry of Commerce, and implement all their desires, as they have the right to enter all places and conduct inspections, in addition to the work of confinement in the event of any violation.
Commercial agency contract template
In the name of God, the most gracious, the most merciful
It is on the day of ……… on the date of ……………. In the area of ……… it was agreed upon:
- That the company …………….which was established based on the laws and regulations established by the Kingdom of Saudi Arabia, and this company is located in the place of…………………….and holds a commercial registration…………..and Mr.……. .and his nationality………….to represent and supervise the company. ” the first side”
- That the company …………….which was established based on the laws and regulations established by the Kingdom of Saudi Arabia, and this company is located in the place of…………………….and holds a commercial registration…………..and Mr.……. .and his nationality…………. acting The company is in the form of a commercial agency contract in Saudi Arabia. “Second Party”
Introduction:
- The first party, which works in the field of ……… and wants to sell all the products it owns and markets for it through a commercial agent, an exclusive distributor in the Kingdom and the rest of the Gulf countries.
- The second party wants to ensure that there is a source for these goods and products in the Kingdom and the rest of the other countries, as it was agreed between them while they were in full mental faculties to:
- This preamble mentioned is part of the contract.
- The first party gives the second party all the exclusive rights to sell and market the products in the Kingdom and the rest of the other Gulf countries.
- That the first party prevents any sale of the product to a third party in the country that was agreed upon, and if this happens, the first party must pay a percentage of … to the second party of the value of the goods.
- The terms of the goods and products that have been agreed upon must be written.
This and that all laws and regulations in which he operates in Saudi Arabia are applicable to this contract.
This contract was written in 3 copies, so that each party carries a copy of the contract, and the second party gives the third copy to the Ministry of Commerce to complete the registration procedures in the commercial register.
The first party “the principal”
- the name:…………….
- the signature:……………
The second party “Agent”
- the name:…………….
- the signature:……………
Common questions that may interest you:
Is the commercial agency an absolute agency?
An absolute agency is bound by custom, meaning that it must adhere to Islamic law in any transaction that takes place, and has the freedom to dispose of time, or price, that is, it differs from a commercial agency.
When does the commercial agency contract expire?
The agency contract ends with the end of the agreed work, or with the expiration of the agreed contract period.
What is the difference between a civil agency and a commercial agency?
A civil agency is civil if the legal disposition is the subject matter of the agency in a civil manner. As for the commercial agency, it is the opposite of the civil one if the legal disposition is the subject matter of the agency in a commercial way.
What is the difference between a commercial agency and a commercial franchise?
Commercial concession: It is a contract whereby the concession is granted to a person, and this allows him to use one of the technical rights or intellectual property rights in order to sell or produce a specific commodity, but this is in favor of the brand that gave him this concession.
As for the agency: in that a person delegates someone on his behalf to carry out certain tasks and manage the matters agreed upon between them.
What is the difference between agency by commission and agency by contract in commercial agencies?
- Commission agency
It is a form of agency in which the agent gives a pledge in the name of the principal, and if the commission agent carries out a sale or purchase transaction at a price higher than the normal price or less, the principal has the full right to reject or accept this process.
- agency by contract
Under this contract, the person commits to a certain activity or act in return for a sum of money, but on the condition that this act is in the name of the principal and for his personal account as well.
When is the commercial agency written off?
The agency is written off if the merchant leaves the business, the contract period expires, or a breach of one of the agency conditions occurs.
Conclusion
To this, we have come to the end of the article in which we talked at length about the commercial agency, and our duty to answer all questions that arise regarding the subject, and if you encounter any problem, do not hesitate to contact the Al Othman Law Firm.
Al Othman Lawyers and Consultants Office is pleased to serve you.
