Pre-incorporation Contracts are those that the promoters enter into on the company's behalf prior to the company's incorporation in order to acquire certain rights and property. In other words, Contracts that are required to operate a business or incorporate are known as pre-incorporation contracts. These contracts are formed pre and not post-incorporation, and therefore, are called pre-incorporation contracts.
Incorporating a business offers several benefits to an individual in a corporate structure since it enables owners or shareholders to shield themselves from financial obligations since, following incorporation, it is the company that incurs debt. In order to determine the duties, responsibilities, and obligations of any organisation prior to incorporation, we can take into account pre-incorporation contracts. Pre-incorporation contracts may be preferred in one of two circumstances;
• Internal Arrangement
• Business Arrangement
The following are the main elements that one should bear in mind when developing and negotiating any pre-incorporation contract:
• Due Date
• Name of the Proposed Directors
• Capital Contribution
• The opening of a Bank Account
• Authorized Person
• Reimbursement of Expenses
The Indian Contract Act, 1872 states that pre-incorporation contracts are invalid since two parties are required for the creation of any contract, and in the case of pre-incorporation contracts, the firm is not yet incorporated at the time of the agreement. As a result, the contract does not mention any legal body on whose behalf it would be created.The Specific Relief Act of 1963 is the source of pre-incorporation contract enforcement in India. According to Section 15(h) of the Specific Relief Act of 1963, when promoters of any company enter into an agreement for the benefit of the company before incorporation, it is considered that the company has accepted and warranted the agreement and has also informed other parties of this.
Pre-corporation agreements are preliminary agreements made before a company's incorporation. In essence, this aids the business in establishing future norms and regulations. It establishes the obligations of each promoter for shareholders who will join the business in the future, assisting in the resolution of any ambiguities-related disputes.
Pre-incorporation Contracts are those that the promoters enter into on the company's behalf prior to the company's incorporation in order to acquire certain rights and property.
Pre-incorporation contracts may be preferred in one of two circumstances;
• Internal Arrangement
• Business Arrangement
In favour of Company’s Act, 2013, the requirements are:
• An assurance that the company will be incorporated within a certain timeframe must be made by the agent acting on the company's behalf.
• A promise that, after the business is incorporated, it will be bound by the contract
Pre-incorporation contracts are made by promoters, but at that point, the firm is only a fictional entity and does not actually exist.
Promoters are generally held personally liable for pre-incorporation contracts. Under the Specific Relief Act, if a company does not ratify or implement a pre-incorporation contract, the common law concept would then apply, and the promoter would be liable for breach of contract.
Connect with our expert to discuss your issue, and they will respond right away with a solution.
Once our team has determined the severity of your problem categories, an experienced lawyer will be assigned to you for further action.
Drafting is a crucial instrument for a compelling argument, and our skilled drafter will do it for you.
Our team will keep you informed on the status of your case at regular intervals and provide guidance.
I contacted Lawchef to assist with a somewhat scary situation in which I was being sued personally for something that wasn't our fault. I was concerned we would lose everything, but after only a few sessions, the lawchef team had us under control.
The Lawchef team was not only very competent in a child custody dispute, but also very sensitive to the fact that it was turning out to be a stressful event for everyone concerned. team would regularly "check in" with us to make sure we were aware of what was going on.
The Lawchef team is the best I've ever worked with for contract drafting. He was very responsive when I had questions outside of our sessions and has always explained things to me in language I can readily understand.