THIS IS TO CLARIFY REHANA IN PARTICULAR AND IN INTEREST OF ALL THE STUDENT COMMUNITY In order to get the benefits of a ‘corporate personality, it is very necessary for ‘an association of persons to become incorporated under the Companies Act, 1956. After the incorporation of association of persons the company comes in existence, and it can start its business operations as company only after that. The simple reason behind it is that before incorporation company do no has any legal existence before incorporation, and if the ‘association of persons enters into an agreement in the name of company before incorporation; the agreement would be void ab initio. It would be a matter of inconvenience that ‘an association of persons cannot perform any official business operation in the name of company before its incorporation or the issue of certificate of commencement of business; they may have to make arrangement for office, place of work, worker, etc. In order to do away with these inconveniences, the promoter can enter into the agreements in the benefit of ‘association of persons or prospective company; these agreements are known as pre-incorporation contract. Under the strict principles of contract law, the promoter is solely liable for the breach of contract. The reason behind is that the promoter is party who enters into the contract, and not the company. The rule of privity of contract keeps away the company from pre-incorporation contract. But recent development in corporate law and contract law makes the company liable for pre-incorporation contract. THANK U URS CA PRASANNA KUMAR
Posted on: Thu, 31 Oct 2013 18:10:24 +0000