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PRE-INCORPORATION CONTRACT & INCORPORATION COMPANY - Coggle Diagram
PRE-INCORPORATION CONTRACT & INCORPORATION COMPANY
PROMOTERS
Breach of contract/dishonest in disclosure:
'Damages for Breach of Fiduciary Duty'
'Recovery of Secret Profit'
they will give/pay back the money they have taken. They did this because the want the project to keep on going.
'Recission of Contract'
treat is as if nothing ever happened. It is also known as resigned contract.
Roles:
To be in fiduciary relationship where they have to be morally right: honest, responsible and strict
To be clear in disclosure in every matter whether in profits or budgets. They have to be honest and transparent
Promoters can be assisted by an organization or they are independent.
Definition:
Person that finds the people to represents the company like directors, CEO, etc...
Person that undertakes everything to form a company & take necessary steps to accomplish it.
Person that involve in the company formation or to be incorporated.
PRE-INCORPORATION CONTRACT
Section 35(1) and 35(2)
pre-incorporation contract is invalid and the company is not liable. However, the promoters are liable.
Section 35(1)
contracts or other transaction allegedly made by a company before it was formed or by a person acting on the company's behalf before it was formed may be approved by the company after it was formed, at which point the company would be bound by it and entitled to the benefits of it as if it had been a party and had been in existence at the time the contract or other transaction was made.
Section 35(2)
without clear agreement, the person or individuals who claimed to act in the name or on behalf of the company shall, prior to approval by the company, be personally bound by the contract or other transaction and shall be entitled to the benefit thereof.
INCORPORATION OF COMPANY
Effects of it
will be separate legal entity AKA SLE
Salomon v Salomon: Salomon owned a majority stake in the firm, hence it was attempted to hold him personally accountable for the debt of the company. The court ruling was the company's debts were its own and could not be attributed to its members or agents.
can sue and be sued
only affect the company and not the people. On the other hand, shareholders can sue the people and not the company but the company can sue people. Foss v Harbottle: shareholders filed a claim against the board of directors of the business which resulted in the company and the members aren't the same due to SLE.
Ability to own property
Macaura v Nothern Assurance Co. : Mr. Macaura sold all of his timber for share capital, unfortunately, a fire broke out and destroy the timber and he sought out insurance. The court ruling was the timber belonged to the company thus the company can receive insurance but not Mr. Macaura.
Limited liability
all liabilities incurred by the firm must be paid for by the company alone, not by its members. The consequences will depend on what you've contributed to the company; the outcome will be the same as what you have contributed.
perpetual succession
can have replacement to fill in the role of someone in the company like directors. Despite members had died, the company will continue to exist.
Powers of a company
incorporation has company act and company constitution: MOA & AOA
acts through its agents
a company is a legal separate entity that only can act through natural persons.
LIFTING CORPORATE VEIL (DEFENSE)
ignoring the corporate persona and focusing on the real individuals in charge of the business