Is company bound by the pre-incorporation contracts?
However, during the pre-incorporation stage the company on whose behalf the Promoter is entering into an agreement, does not exist. Hence, a company cannot enter into a contract before its existence. In the present case, the principal i.e. the company does not exist, thus she cannot bind the company by an agreement.
Who is bound by a pre-incorporation contract?
Unlike the common law Section 131(1) states that the company becomes bound by the pre-registration contract if the company ratifies the contract within in the reasonable time after the incorporation.
Who is liable for the breach of pre-incorporation contracts?
The Court held that the promoters are personally liable for the pre-incorporation contracts. In Weavers Mills Ltd. v. Balkies Ammal AIR 1969 Mad 462 case, promoters had agreed to purchase some properties for and on behalf of the company to be promoted.
Which company can start business even without getting certificate of commencement?
After certificate of incorporation, a private company can start its business. Incorporation of a Joint stock company is compulsory. Without incorporation, all the contracts would be considered void in the eyes of law and operations of business cannot be carried out.
What are the duties of promoters?
Duties of a Promoter
- Duty to disclose secret profits. He is allowed to make profits but not secretly which will be harmful to the company.
- The duty of Disclosure of Interest.
- Duty under the Indian Contract Act.
- Termination of the Promoter’s Duties.
What is the legal position of directors in a company?
The directors occupy a fiduciary position in relation to the company’s affairs and they are considered trustees with respect to the company’s property and money. They are also trustees as regards powers entrusted to them.
What are the duties and liabilities of promoter?
The duties of promoters are as follows:
- To disclose the secret profit: The promoter should not make any secret profit.
- To disclose all the material facts:
- The promoter must make good to the company what he has obtained as a trustee:
- Duty to disclose private arrangements:
- Duty of promoter against the future allottees:
Why is promoter not a trustee?
A promoter is neither a trustee nor an agent of the company which he promotes because there is no trust or principal in existence at the time of his efforts. As such he is said to be in & fiduciary position (a position full of trust and confidence) towards the company and the original allottee of shares.
Which of the following company companies are registered by the Companies Act 2013?
Examples of these types of companies are Reserve Bank of India, Life Insurance Corporation of India, etc. 2. Registered Companies: Companies registered under the CA, 2013 or under any previous Company Law are called registered companies.
What are qualities of promoter?
Characteristics of a Promoter: A promoter conceives an idea for the setting-up a business. He makes preliminary investigations and ensures about the future prospects of the business. He brings together various persons who agree to associate with him and share the business responsibilities.