Commercial Agents (Council Directive) Regulations 1993
What this means for your business
- Enforced by
- Mining Remediation Authority, National Highways, Natural England
- Applies to
- United Kingdom
- On this page
- 15 compliance obligations, 1 practical guide
What you must do
15 compliance obligations under this legislation.
Management duties 7
Do not contract out of agent or principal duties
When you draw up a commercial agency agreement you must not include any terms that reduce or remove the duties owed by the agent or by you as the principal under the Regulations. If you do, any breach will be dealt with under the law that governs the contract.
Do not diminish commercial agent's termination rights in contracts
You must not include any clause in a commercial agency agreement that reduces or removes the agent’s right to compensation or indemnity when the contract ends, as long as the contract is still in force. Any such clause is invalid, so you need to check your agency agreements to make sure they respect those rights.
Ensure lawful termination to avoid indemnity payments
If you end a commercial agent agreement because the agent has breached the contract in a way that justifies immediate termination, you do not have to pay them any compensation. However, if you terminate for other reasons, or the agent quits (unless it’s due to your fault or their health), you may have to pay. You also avoid payment if the agent transfers the contract to someone else with your agreement, so you need to check the reason for termination and keep proper records.
Give proper notice when ending a commercial agency agreement
If you hire a commercial agent on an open‑ended contract, you must give them at least one month’s notice in the first year, two months in the second year, and three months from the third year onward. The notice period can’t be shorter than the agent’s own notice, and, unless you agree otherwise, the notice must finish on the last day of a calendar month.
Limit restraint of trade clauses in agency contracts
If you appoint a commercial agent, any non‑competition clause you include must be in writing, only cover the area, customers and goods the agent actually handles, and can last no longer than two years after the agency ends. This means you need to check the wording and duration of such clauses before the contract is signed.
Only extinguish commission rights when contract fails through no fault of yours
You can only cancel a commercial agent’s right to commission if the third‑party contract never happens and the failure isn’t because of you. If you do cancel it, any commission you’ve already paid must be paid back. You must also make sure your agency agreement doesn’t contain any clause that reduces the agent’s commission rights.
Provide information and timely updates to your commercial agent
If you work with a commercial agent, you must deal with them honestly and in good faith. You need to give them the paperwork and information they need to sell your goods, warn them promptly if you expect a drop in sales, and tell them as soon as possible whether you accept, reject or do not act on any deal they bring you.
Other requirements 1
Act in good faith and follow your principal’s instructions
If you act as a commercial agent for a client, you must put their interests first, work honestly and diligently, try to negotiate and close the deals you’re asked to handle, keep them informed of all relevant information, and obey any reasonable instructions they give you. In practice this means running the relationship transparently and documenting your actions.
Payments and fees 5
Pay commercial‑agent commission on time
When you, as a principal, complete a trade transaction (or should have completed it) the agent’s commission becomes due. You must pay the commission by the last day of the month after the quarter in which it became due, and you cannot contract‑out of this right to the detriment of the agent.
Pay commission correctly between new and previous agents
When a transaction generates a commission after an agency agreement has ended, you must only pay the commission to the agent who is legally entitled to it. If the commission should be shared, you need to decide a fair split; any amount paid to the wrong agent must be refunded to you.
Pay commission to commercial agents for post‑termination sales
If a sale that you close after ending an agency agreement was mainly due to the agent’s work while the agreement was in place, or the buyer’s order reached you or the agent before the agreement ended, you must still pay the agent their commission. The commission is payable for any qualifying transaction that occurs within a reasonable period after the contract ends.
Pay commission to commercial agents for qualifying transactions
If you use a commercial agent, you must pay them commission for any deal made while their contract is active if the deal was caused by the agent, or if it involves a customer the agent previously introduced. You also have to pay commission when you have given the agent exclusive rights to a territory or customer group and a deal is made with those customers.
Pay indemnity or compensation to commercial agents on contract termination
If you end a commercial agency agreement, you may have to compensate the agent for lost commissions or unrecovered costs, unless your contract says otherwise. The payment is limited to up to one year's average earnings and the agent must notify you of their claim within one year of termination, otherwise they lose the right to claim.
Record keeping 1
Provide signed written statement of agency contract terms on request
If you are a commercial agent or the principal you hire, you must give the other party a signed written document that sets out all the terms of your agency agreement whenever they ask for it. You cannot agree to waive this right – the other side can always request the written terms.
Reporting and filing 1
Provide commission statements and allow inspection of books
If your business uses a commercial agent, you must send them a written statement showing how much commission they are owed, no later than the last day of the month after the quarter in which the commission became due. You also have to give the agent any books or extracts they need to check that calculation when they ask for it.
Practical guidance
Our guides explain how to comply with the requirements above.
Sections and provisions
23 classified provisions from this legislation.
Duties 15
- s.3 Duties of a commercial agent to his principal
- s.4 Duties of a principal to his commercial agent
- s.5 Prohibition on derogation from regulations 3 and 4 and consequence of breach
- s.7 Entitlement to commission on transactions concluded during agency contract
- s.8 Entitlement to commission on transactions concluded after agency contract has terminated
- s.9 Apportionment of commission between new and previous commercial agents A commercial agent
- s.10 When commission due and date for payment agreement
- s.11 Extinction of right to commission
- s.12 Periodic supply of information as to commission due and right of inspection of principal’s books agreement
- s.13 Right to signed written statement of terms of agency contract be entitled
- s.15 Minimum periods of notice for termination of agency contract
- s.17 Entitlement of commercial agent to indemnity or compensation on termination of agency contract
- s.18 Grounds for excluding payment of indemnity or compensation under regulation 17
- s.19 Prohibition on derogation from regulations 17 and 18
- s.20 Restraint of trade clauses