Ratifying of pre-incorporation contract

This query is : Resolved

vinay (Querist)
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17 February 2011 Dear all,

One of the promoter of the Company (public Limited), which is proposed to be incorporated had purchased a land for the Company, by executing the Contract on behalf of the Company.

But he has made the payment to the other party by getting loan from another Company.

The arrangement was in such a way that the Loan made by the promoter shall be repaid by the Company which is to be incorporated.

So, now can the Company can ratify the agreement after its incorporation and pay the loan that has been made by the promoter.

Kindly reply at the earliest.

Jayashree S Iyer

Jayashree S Iyer (Expert)
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17 February 2011 The company cannot ratify the pre-incorporation contracts. The promotor is personally liable for all pre-incorporation contracts.

Since the company is yet to be incorporated, the land can be purchased in the name of the promotor who paid the money through borrowing.

After the formation of the company the promotor can sell the land to the company and get the payment from the company.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2025 Yes, the company can ratify the agreement after incorporation and repay the loan advanced by the promoter. This ratification makes the contract binding on the company going forward.

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