Commercial agent compensation

The commercial agent may have the right for a settlement claim at the end of the contractual agreement. This settlement represents the compensation for services provided by the commercial agent, which also have a beneficial effect on the entrepreneur after the contractual relationships has ended. The appropriate compensation therefore related to expected sales to the customers, which the sales representative either recruited himself or with whom he substantially intensified the business relationship. Also sub-dealers and employee-like commercial agents within the meaning of § 92a HGB can be entitled to compensation. Depending on the individual case, compensation claims can also be made by dealers, travel agencies, petrol station lessees and owners of lottery agencies. However, no settlement for compensation can be made, if the concerned person has been expressly commissioned only as commercial agent as secondary occupation (§ 92b HGB). The individual eligibility requirements are regulate in § 89b HGB and are briefly presented in the following overview.

Termination of the contractual agreement

A claim for compensation arises only after the termination of the contract, expiration of the deadline, death of the interested person or mutual termination agreement. It is always important to consider which was the party who wanted the termination of the contract and for which reasons this happened. If the one terminating the agreement is the sales representative, there is usually no claim that can be arisen, unless the conduct of the company he was working for has been the cause of such a termination, or if the sales representative can not reasonably be expected to continue his work because of his age (statutory retirement age) or illness. On the other hand, if the company does want to terminate the contractual relationships for important reasons concerning the culpable behavior of the sales representative, possible claims for compensation will lapse. The claims will also lapse in case of agreed termination of the contract and a third party enters into the contractual relationship replacing the commercial agent (successor clauses). In case of death of the commercial agent, the right for compensation will be transferred to the heirs.

Amount of the compensation claim

As a matter of fact, the common idea that the agent´s compensation claim would generally amount to an annual commission is wrong. The average annual commission from the last five years represents a maximum limit. The following conditions have to be taken into consideration when calculating the compensation claim:

New clients: Within the scope of forecasting, it must be determined what kind of significant economic advantage the business is likely to have after the termination of the contractual relationship from those business relationships that the sales representative has established or significantly intensified. The law assumes a significant increase in the turnover of the old customer by at least 100 %. Disputes about new customers can be restricted if, at the beginning of the contractual relationship, a list of existing customers with turnover is created.

Business connections with new customers: The customer relationships (new or old customers) must be of certain duration. Customers recruited by the sales representative who are not interested in placing further orders (so-called “one time customers”) are not relevant for a further development of the company. Connection with old customers could however be a problematic asset. A forecast for succession or replacement orders has to be created.

Benefits of the company: The benefit of continuing the business relationship with customers is the expected future profit of the company. A concrete period within which these profit possibilities must be taken into account does not name the law; decisive are the circumstances of the individual case. Even with a (partial) sale of the company, the right to compensation is not excluded in principle. The benefit of the company may be reflected in the share of the customer base included in the purchase price.

Commission losses of the commercial agent: The commission losses of the commercial agent are formerly an independent fact.  Since 2009, provision losses are to be considered only in the context of the fairness and equity.

Criteria ensuring fairness: Numerous other circumstances can influence the level of equalization in terms of fairness. These may include for instance, an entrepreneur-financed supplementary pension for the commercial agent, the economic and social situation of the contracting parties or the economic situation.

Maximum limit of compensation claims

The resulting crude adjustment shall be compared with the maximum amount of compensation. The maximum compensation amount must take into account both the total annual revenue of the sales representative from the last five contractual years, including agency fees for existing customers, administrative commissions, collection commissions and surplus commissions. If the equalization exceeds the maximum amount of compensation, the right shall be reduced to a maximum of one annual compensation. If the contractual relationship lasted less than five years, the average is decisive for the duration of the contractual relationship.

Enforcement of the compensation claims

The claim can be filed legally only within one year after the termination of the contractual relationship.

Exclusion of the compensation claim

The right for compensation applies only after the termination of the contract. Upon or after termination of the contract however, agreements on the payment and on the amount of compensation claims are possible.

German Commercial Law

Commercial law concerns all the relations between business partners. The most important legal regulation in Germany is the commercial code (Handelsgesetzbuch – HGB). In every business negotiations, HGB applies. Many questions of interpretation are also solved and regulated by the statute law, commercial practice and trade customs.

German commercial law has been heavily influenced by Italian and French commercial law. In some cases it is important to co-work with company law, intellectual property law, securities law and banking and stock exchange law codes.

Commercial Law Firm Profile

Horak Attorneys at law are here to assist you and support you on every kind of commercial law business. Our team is composed of lawyers with different professional backgrounds and this is our richness. Our services are tailored to fit your needs. Our basic principle consists in professional expertise, excellent education, continuous vocational training and experience. Our individual traits throughout all our activities are defined by specialisation, expert knowledge in different branches and of well as creativity. Early consultations in legal matters will help you avoid future possible legal disputes.

We complement one another having in mind one goal: your success. Are you looking for a reliable partner to put your plans and ideas into action? Contact us to have one of our lawyers confidentially advise you. Personal contact is very important for us – the choice of means of communication is up to you. Your lawyer assists you constantly at any point of your road to success. Your goal is our goal.

Right of representation

Our lawyers are authorized to represent all courts (all local, state and higher regional courts as well as all federal courts with the exception of the BGH (Higher Regional Court). We also assist our clients before the European Court of Human Rights (ECtHR), the European Court of First Instance (ECJ), the European Court of Justice (ECJ) and many other national and international authorities and arbitration tribunals.

Commercial law issues:

Distribution Contracts and Commercial Law

The distribution and commercial rights within Germany or the EU as well as the import and export of goods, especially from third countries such as China, India, Turkey, Indonesia but also the USA, have an important role to play.

We offer the following legal services in distribution law to our clients:

  • Planning, design, testing and optimization of distribution contracts and systems;
  • Terms and condition;
  • Terms of purchase and delivery
  • Import and export delivery contracts
  • Framework agreements
  • Examination of all contractual and non-contractual claims (such as injunctive relief claims, commission claims, compensation claims in accordance with § 89bHGB, information claims, anti-trust claims for damages;
  • Enforcement of rights in case of breach of contract or breach of law by one of the partner:
  • Litigation for international and national cases,
  • Representation in international arbitration,
  • Enforcement
  • Enforcement of rights in case of contractual infringement
  • Defense against unjustified claims
  • Tactical advice and representation.

Commercial and distribution agent

Section §§84 to 92c of the German Commercial Code (HGB-Handelsgesetzbuch) regulates the rights and obligations of the commercial agent and the company he represents. According to §84 HGB, a commercial agent is the person entitled in representing an independent trader, mediating with other entrepreneurs or finalizing businesses on its behalf.

It is considered self-employed, someone able to freely determine his own activities and working hours, carrying his own entrepreneurial risks (thus not an “employee”). So-called trade representatives exists in all conceivable industries and sectors, regardless of the type of legal form (for instance also as OHG, KG or GmbH). The actual features of the activity and the commercial agent´s contracts are decisive for the existence of a commercial representative business. Following, the characteristics that should be fulfilled in order to be considered a commercial representative:

  • Permanent contractual relationships with the represented company;
  • Mediation/ Conclusion of transactions and customer care in the name and on behalf of the represented company;
  • Self-employed (own business, entrepreneurial risks, trade taxation etc.);
  • Free organization of activities and free determination of working hours (freedom from instructions);
  • Payment of remuneration without deduction of taxes and social security contributions.

The settlement of the commission has to be done monthly. The billing period can be extended to a maximum of three months.

International Commercial Law

International business not only means import or export of goods to other countries, this also means entering the legal area of another country, and this is not to underestimate.

Anyone who wants to avoid unpleasant surprises should arrange all contracts in the most legal way possible in advance.

Post-contractual restraint  

Under the preconditions of §§ 74 et seq. HGB, a non-competition clause is to be found in many agreements and can also be agreed for a certain time after termination of the contractual relationship. The regulations are not only applicable to commercial employees, but are also directly applicable under § 110 GewO for all other employees. They are not directly applicable for authorized organ members. Apart from formal requirements, the non-competition clause requires a compensation to be granted and a maximum of two years since termination of employment (section 74a (1) sentence 3 HGB). In the event that the conditions have not been met, often voidness of the clauses or a right of choice of the obligated party is considered.

Sales representatives law

The HGB also applies without restriction to sales agents: this means that who is legally recognized as sales representative has the right to appeal to the HGB. According to § 1 Abs. 1 HGB is salesman, who operates a trade. Connection point is therefore the business enterprise. The entry in the commercial register is irrelevant. Business enterprise is any independent, externally recognizable activity that is designed for durability and profit and that is not a “free profession”. According to the definition of § 84 I 2 HGB a person is self-employed if he is essentially able to arrange his activities freely and to determine his working hours. Excluded are only those companies whose operation does not require a commercial enterprise set up in a commercial manner (see § 1 (2)). The exact limit is not definable. Corporations are by virtue of their legal form salesmen. On the other hand, the liberal professions, scientific and artistic activities as well as agriculture and forestry are excluded. In addition to this commercial concept, which has been included since 1.1.1900 since the German Commercial Code, the so-called “company concept” exists in the Civil Code. This distinguishes companies and consumers.

Company Names law

The name of a company is the name of the salesman according to the commercial register.

According to § 18 HGB, the business name shall be suited to designate the merchant and shall have a distinctive character. The business name shall not contain any information which is apt to be misleading with respect to business circumstances that are of material relevance for the market groups concerned. In proceedings before the court of registration, the aptness to mislead shall be taken into consideration only if is apparent.

Business Correspondence law

Depending on the kind of company, different laws apply.  For instance, limited liability companies (GmbH) required all business letters to be addressed to a specific recipient and must indicate the company´s legal form and registered office, the court of registration at the place of the company´s registered office and the number under which the company has been entered in the Commercial Register, the directors and, if the company has established a supervisors board and the supervisory board has a chairperson, the chairperson of the supervisory board together with his family name and at least one given name written out in full (pursuant § 35a GmbH https://www.gesetze-im-internet.de/englisch_gmbhg/englisch_gmbhg.html#p01959 ).

Similar provisions are included into §80 AktG for public limited companies, § 125a HGB for open trading companies (and limited partnerships) and § 37a HGB for other traders. Invoices must contain, (according to § 14 I 1a UStG) the tax number of the performing of the national tax number of the performing entrepreneur be specified. It concerns the national tax number and not the so-called sales tax- identification number (VAT ID). The latter can be voluntarily registered at the Federal Finance Office in Saarlouis and serves VAT-free business transactions within the EU.

Commercial Law for Start-Ups

We recommend basic consultations on the appropriate way to form a company. Who wants to enter the trade-world, requires a trading license. This is obtained after completing a so-called business opening form Gewerbeeröffnungsbogen of the Public Order Office of the municipality or city in which the company is located. Then the local IHK communicate to the enforcement of the (compulsory) membership and announces the payment of the contributions. Anyone who employs staff must also join a professional association (BG). This usually addresses itself to the person concerned. In addition, the IHK, the municipalities, other authorities and many other institutions can offer funding opportunities for the concrete enterprise.

Transport law, Spedition law, and Warehousing law

The transport law includes the following areas: Land Freight Law, Air Freight Law, Rail Freight Law and Inland Navigation Law, Freight Forwarding, Warehousing and Logistics Law, Maritime Law. Also included are customs law, insurance law and international private law. In addition, general damage and insurance law as well as contract drafting and designation constitute the practically essential focus in the light of the aforementioned legal framework.