Liability of Promoters During Pre-Incorporation Contracts

4690 WordsOct 2, 201219 Pages
Topic: Liability of Promoters During Pre-incorporation contracts Table of Contents Introduction 3 Research Methodology 6 Research Questions 7 Chapter 1: Promoters and Pre-incorporation Contracts 8 Chapter 2: Fiduciary duty of the promoter 11 Chapter 3: Breach of the pre-incorporation contract and the Liability of Promoters 13 Conclusion 19 Bibliography 20 Introduction A company is an entity which is recognized and created by the law. It can only contract when the law deems it to come into existence. This is the time when the company receives whatever powers the law and its constitution accords to it. Until a company is registered it has no existence of any kind. Many a times, promoters wish to enter into contracts which are…show more content…
Substantive material from the internet has also been referred to. Scope and limitation Even though the concept of the liability of the promoters for pre-incorporation contracts is a very vast concept which requires a theoretical line of thinking to understand it but it is not practically possible to deal with all the sub-topics in great depth as a part of this paper. So the research has been limited to the scope as to how far can the promoters be liable for the pre-incorporation contracts and what are the consequences that follow from the breach of it. Research Questions: * To what extent does the Liability of the Promoters exist with regard to Pre-incorporation Contract? * How far can the promoters be held responsible for the breach of Uberima fides relation between the Company and the Promoter? Chapter 1: Promoters and Pre-incorporation Contracts Before a company commences business, it has to enter into several contracts and incur several initial expenses. Contracts which are entered into by promoters with parties to acquire some property or right for and on behalf of a company yet to be formed are called as ‘pre-incorporation contracts’ or ‘preliminary contracts’. The promoter is obligated to bring the company in the legal existence and to ensure its successful running, and in

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