Pre incorporation contract

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Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2012 “A Company passes a Special resolution under Section 31 to ratify a Pre-incorporation Contract prior to receiving the certificate of commencement of the business by altering the Article of Association. Will Such Special Resolution be valid? and will ratifying the PIC will amount to commencement of business?

Jitendra Vyas

Jitendra Vyas (Expert)

03 March 2012 Not Valid and company Can't pass this resolution. If contract is after incorporation but before commencement of the business certificate, company may pass this type of resolution.

Ajay Mishra

Ajay Mishra (Expert)

03 March 2012 Hi

Preliminary contracts are contracts purported to be made on behalf of the company before its incorporation. Before incorporation, a company is not in existent and has no capacity to contract. Consequently, nobody can contract as agent on its behalf because an act which can be done by the principal himself can not be done by him through an agent. In {Kelner v. Baxter (1866) L.R. 2 C.P. 174} it was held that a pre incorporation contract can not be retified by th company after incorporation.

So i will suggest you that pre incorporation contract can not be retified by altering AOA.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2012 but what about s 15 of Specific relief act. it says that the PIC can be ratified on the basis of 3 condition. My main question if such PIC is ratified after incorporation and before obtaining certificate of commencement of business, then that alteration will amount to commencement of business??