Nobody downloaded yet

Examination of the Extent to which section 51 Companies Act 2006 has clarified the Law relating to Pre-Incorporation Contracts - Essay Example

Comments (0) Cite this document
Summary
Examination of the extent to which section 51 Companies Act 2006 has clarified the law relating to pre-incorporation contracts. Name Tutor Institution Subject Code Introduction A pre-corporation contract is a legal agreement by a juristic person, which is entered into when a Company being in the process of being incorporated has not yet completed it, such contracts are void at common law, as the Company is not yet in existence (Griffiths, 1993, p245)1…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.7% of users find it useful
Examination of the Extent to which section 51 Companies Act 2006 has clarified the Law relating to Pre-Incorporation Contracts
Read TextPreview

Extract of sample "Examination of the Extent to which section 51 Companies Act 2006 has clarified the Law relating to Pre-Incorporation Contracts"

Download file to see previous pages The purpose of pre-incorporation contracts is to encourage entrepreneurship and efficiency in creating simplicity and flexibility in formation and maintenance of companies. It also satisfies the need of an upcoming company to acquire rights and liabilities. This ensures that the company can start with business after incorporation. The challenge is that these companies do not have legal personality, due to their inexistence, and thus cannot make agreements. It is therefore important to evaluate the advantages and the shortcomings, and the future of the same on the role of promoters. If the Company does nothing, it is taken to have ratified to the agreement and the promoter is not be personally liable for the agreement. However, if the incorporation of the company has not been done or, after incorporation, rejects the agreement, the promoter becomes automatically liable for liabilities that may be created in the course of acting as promoter and entering into agreements. The liability is then discharged only if the company subsequently enters into an agreement on similar terms or in exchange of, the pre-incorporation contract; or to the ends that the Board ratifies or is taken to have ratified the contract or action. The only option is then to have a promoter or agent contract in the company’s behalf. They thus incur liability for the company before incorporation. A promoter, according to the case of Twycross v Grant, 3 is one who forms a company with reference to specific projects and set it going, and take necessary steps to meet that purpose. This includes those who take the procedural steps necessary to form the company, or sets up the company’s business, but not those acting merely in professional capacity on the instructions of a promoter. They deal with formalities of registration of companies, from finding directors and shareholders to holding negotiations for business contracts for the new companies. They are also involved in the formation of a company and are thus personally liable for the pre-incorporation contracts as neither the principle and agent relationship exists. Reason being the lack of that relationship between the agent and the principal as there is in real sense no principle. The common law puts in obstacles to those wishing to contract on behalf of such companies. This is to discourage people from signing or contracting on behalf of non-existent companies. These companies are not legal entities and thus are not permitted to perform juristic acts. According to common law, no person has the right to act as an agent of a company not yet established, in the expectation of ratification after it becomes incorporated. A company cannot then gain legal status before its existence of attaining contractual rights or sustaining contractual liabilities that exist from pre-incorporation agreements. These contracts cannot then oblige a company. The status of promoters ceases to exist after formation of the board of directors. Promoters of the company may also undertake to enter into contracts on the entity’s behalf, where the company may later refute to approve or consent after incorporation. This position is important as it prevents fiduitiary promoters claiming to be acting for the company, as in the case of ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Examination of the Extent to which section 51 Companies Act 2006 has Essay”, n.d.)
Examination of the Extent to which section 51 Companies Act 2006 has Essay. Retrieved from https://studentshare.org/law/1450077-critically-examine-the-extent-to-which-section
(Examination of the Extent to Which Section 51 Companies Act 2006 Has Essay)
Examination of the Extent to Which Section 51 Companies Act 2006 Has Essay. https://studentshare.org/law/1450077-critically-examine-the-extent-to-which-section.
“Examination of the Extent to Which Section 51 Companies Act 2006 Has Essay”, n.d. https://studentshare.org/law/1450077-critically-examine-the-extent-to-which-section.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Examination of the Extent to which section 51 Companies Act 2006 has clarified the Law relating to Pre-Incorporation Contracts

Company Law: Section 31 of the Companies Act 2006

...?Company Law: Section 31 of the Companies Act 2006 Introduction Section 31 of the Companies Act 2006 is a provision concerning the removal of the objects clause of the company. The objects clause concerns with the purpose of the company and the range of the activities that company may perform1. This objectives and range of activities that can be performed by the company was often defined by the Companies Act 1989 and today effectively removed by the...
9 Pages(2250 words)Coursework

To What Extent Does a Director's Duty Under Section 175 Companies Act 2006 Continue Post-Resignation

...Phipps.4 Of most interest in this discussion is section 175 of Companies Act 2006. In reference to section 175 Companies Act 2006, this discussion will consider the extent to which a director’s duty will continue post-resignation. In particular, section 175 of the Companies Act 2006 deals with the director’s duties concerning conflict of interest (actual and potential). The main rationale of this provision is to codify the subsisting principles of case law and to develop parallel principles to the...
8 Pages(2000 words)Essay

The Equality Act 2006

...The Equality Act was introduced in 2006. To what extent has this legislation had an impact on business management decisions The Equality Act 2006) is a step toward the long awaited Single Equality Act which is expected to consolidate all anti-discrimination legislation. The Equality Act (2006) covered: the creation of the Commission on Equality and Human Rights, anti-discrimination in the provision of goods and services on the grounds of religion, belief and sexual orientation, and for the first time placed a duty on public authorities to promote equality of opportunity between men and...
15 Pages(3750 words)Essay

Consumer Credit Act 2006

...Aims and Objectives This paper seeks to enquire whether the amendment act of 2006 is going too far to protect the consumers against the creditors and suppliers. Hence principles of Consumer Credit Act 2006 will be examined and whether the act gives too much leverage to the consumers who are the debtors to the detriment of creditors and suppliers. Chapter 2 .Literature Review Literature review is a part of methodology of qualitative research. It forms the secondary data required for the research. The aim of the present study will be largely facilitated by review of literature on the subject chosen for the research; that is whether...
16 Pages(4000 words)Essay

Company Law and Companies Act

...the circumstances. If the company is insolvent, the creditor's interests are considered. The act also has provisions for using prevailing case laws linked to equitable duties and the common law for the interpretation and application of statutory duties. Some of the important statutory duties include acting within the powers of the director, exercising of independent judgment, exercising of reasonable care and skill, avoidance of conflicts of interest, not accepting benefits from a third party and promoting the success of the company and its shareholders. Although the statutory duties laid down by the...
14 Pages(3500 words)Case Study

Management Credibility and Honesty

...is a function of people, process and technology. People management has become a significant part of the line manager’s job and plays a crucial role in performance management. Honestly and Credibility of a Company: The Enron Saga This section examines the relevant events leading up the Financial Collapse of Enron and its impact for the future of financial reporting in line with the assessment of the impacts of honest and credible management on working capital. The essay goes on to discuss the valuable lessons from financial reporting and the preparation of published financial statements. On October 16, 2001, Enron Corporation of Houston, Texas, one of the largest...
11 Pages(2750 words)Essay

Companies Act

...constitutes the company's charter with the outsiders dealing with the company and usually contains a number of statutory classes. The Articles of Association on the other hand are the regulations governing the internal management of the company. Section 7 of the Companies Act 1985 has given the option to the companies limited by shares to adopt Table A instead of filing separate Articles. It is established law that where there is a conflict between the Memorandum and Articles of Association the Memorandum prevails. 2.0 Character of the Memorandum and Articles of...
10 Pages(2500 words)Essay

Pre-Incorporation Contracts

...of the fast food city was outside the purpose for which the preparatory committee was set up. Under Article 61 of the General Principles of Civil law the property acquired pursuant to a civil juristic act becoming void, the property should be returned to the party who has lost it. There are various other decisions given by the courts under the common law for the restitution of rights as well as settlement of claims under the pre incorporation contracts in all the cases the courts have looked into the elements of: The nature of the contract entered into; whether it is necessary for the...
9 Pages(2250 words)Essay

The Equality Act 2006

...the GED, do not come into force until 6 April 2007. The CEHR will be established from October 2007. Q Will there be any guidance on how to comply with the Act? A The EOC has already begun an online consultation, which lasts until 15 May, about a Code of Practice. It is also holding a series of events during February and March 2006 to explain the details and implications of the legislation and to enable discussion and feedback. By Richard Linskell, partner, Dawsons BOXTEXT: For more information, go to the EOC's website www.eoc.org.uk BOXTEXT: Access the consultation at http://eoc.dialoguebydesign.net/dbyd.asp BOXTEXT: Jenny Watson explains how the Gender Equality Duty will affect HR...
14 Pages(3500 words)Essay

The impact and regulation of the Companies Law Act 2006

...has been reduced; some clarity is inevitable in codification. It appears that it is as simple as is possible in an area of law that is enmeshed in and sentimentally tied to years of development. The previous law cannot be completely discarded, for the whole basis of the Act depends upon its very principles and would fail miserably without it. By virtue of section 171 of the Act, the duty to act in accordance with the company constitution and exercise powers for the purpose which they were conferred remains. This duty did not feature to a large extent in common law...
6 Pages(1500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Examination of the Extent to which section 51 Companies Act 2006 has clarified the Law relating to Pre-Incorporation Contracts for FREE!

Contact Us