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 clarified the Law relating to Pre-Incorporation Contr stand fors - Essay ExampleThe solve of pre-incorporation proclamations 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 follow to acquire rights and liabilities. This ensures that the company idler start with business later on incorporation. The challenge is that these companies do not have profound personality, due to their inexistence, and thus cannot make agreements. It is therefore important to evaluate the advantages and the shortcomings, and the incoming 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 probable 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 indebtedness 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 mount 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 companys 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 companys business, but not those acting merely in professional capacity on the instructions of a promoter. They deal with formalities of enrollment of compan ies, 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 detection 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 f rom pre-incorporation agreements. These contracts cannot then oblige a company. The status of promoters ceases to exist after formation of the carte du jour of directors. Promoters of the company may also undertake to enter into contracts on the entitys 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