pre incorporation contracts

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Guest

Guest (Querist)

31 March 2011 could anyone tell me that what will be the liability of promoters if the company adopts a pre incorporation contract but not enters a fresh contract with the third party?will the promoters remain personally liable even after company adopts the preliminary contract ?

Rameshwar Patel

Rameshwar Patel (Expert)
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01 April 2011 Pre-incorporation Contract Facts -
1. Not binding on company
2. Company cannot rectify the agreement
3. Promoters personal liability
4. Company cannot sue or be sued on that contract.

Later if the company adopts(accepts) a pre incorporation contract and communicated such acceptance to the other party, then company will be liable not the promotors.

for your reference the two words important are
1. whether company has communicated to third party of his acceptance or adoption of pre incorporation contracts...
2. if communicated then no need of freshh contract with 3rd party, it is binding on the company and promotors would not be liable anymore.

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