Who will be liable for any breach of provisional contracts entered into by a Public Company with a third party before commencement of business? If the Company does not receive the certificate of commencement, can the third party enforce the contract against the company?
2 Replies
CA Trinath Galla
(student)
(3130 Points)
Replied 08 December 2009
no, provisional contracts will bind the company only after receiving the certificate of commencement of business.
Gopal
(CEO)
(89 Points)
Replied 08 December 2009
A third party can enforce specific perdormance suit against the company on the folowing grounds;
1). if the agreemnet is prior tp the Incorporation certificate date and if the said agreemnet has a reference of consideration price and if such amount is adopted in the first board meeting of the company as preincorporation expences and this transcation is reflecteed in the first annual dircetors report and annual accounts of the company.
2). If the said agreemnet has reference by stating that, post incorporation of the company, the said transaction will be treated as the transaction of the company.
Gopal
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