A commercial agent whose contract was terminated has recently obtained substantial compensation thanks to the expertise of Roger Isaacs, a partner at a South West-based chartered accountancy firm Milsted Langdon, and a leading commercial barrister at St John’s Chambers, Andrew Marsden.
Roger, a partner at the firm’s Bristol office and an experienced forensic accountant, worked closely with Andrew, who specialises in such cases, to help the client secure the undisclosed sum at a recent mediation.
A commercial agent is usually an individual or company that is contracted to act as a sales representative for another organisation. The agent may employ staff to help to carry out the work and will be paid by way of a commission.
Once an agent has built up a strong and loyal customer base or sales income stream, there is a risk that the organisation that he has been promoting may decide it no longer needs the agent and wants to terminate the agency. To protect agents in these circumstances, the European Union introduced the Commercial Agents (Council Directive) Regulations 1993, which provide that agents are entitled to compensation if their agencies are terminated.
Andrew Marsden explained: “In many parts of the EU, the level of compensation that an agent might obtain following termination of his agency is relatively modest but that is not necessarily the case in the UK where, following a House of Lords ruling in 2007, compensation is now based on what someone might reasonably be expected to pay for the agency at the time it was terminated. This value is based on a number of factors, including the strength of the brand being promoted and the agency’s likely future profitability.”
This means that the determination of any compensation for the termination of an agency will almost always have to be a matter of expert accountancy evidence.
Roger Isaacs has considerable experience of valuing agencies and has also acted as a single joint expert.
He said: “The value of the agency and any consequential compensation is only one of the issues that have to be addressed. Others include whether the contractual relationships in any particular case mean that a commercial agency exists and whether it has been properly terminated so as to trigger compensation. For that reason, it is imperative to ensure that both the legal and accounting team has the relevant expertise.
“The combination of expert legal and accountancy advice can, on the one hand, protect those using agents from unjustified or inflated claims and, on the other, can ensure that agents receive the full compensation to which they are entitled.”
The recent case in which Roger and Andrew worked is thought to be one of the largest settlements ever achieved since the regulations were introduced.