What is an agency agreement
When forming a company there are various legal documents that are prepared to ensure that the company is run in accordance with the jurisdictional regulations. One of the documents that is likely to be prepared is the agency agreement; this is a legal contract that uses agent(s) in order to promote the company’s goods and services.
For more information on forming a company and the documents required to register in different jurisdictions across the globe, please view our Company Registration section.
Agency agreement explained
Establishing a company in a different jurisdiction often entails a long procedure that must be completed before investors can begin conducting business activity. There are numerous documents that need to be filed with the relevant regulatory body in addition to the completed application form. Apart from the necessary legal documents, including the Memorandum and Articles of Association, some offshore companies are required to prepare an agency agreement.
An agency agreement acts as a legal document that creates a fiduciary relationship between two parties; the principal and the agent. The agency agreement states that the principal must agree to actions created by the agent, binding the principal to a later agreement that has been made by the agent however the principal must act as if the later agreement had been made by them personally.
Therefore, the agent is given the power to bind the principal in an agreement and the principal will have to carry out the activity as if had made the later agreement personally. This power of the agent is usually referred to as the authority – as it provides the agent with the ability to control the principal.
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