a) State FIVE items that are by law required in the Regulations of a Company Registered under the Companies Act. (5 marks)
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- The name of the company
- “ Limited” as last name for the Limited companies.
- .The nature of authorized business to be carried on by the company or, for non-profit companies, the nature of the objects for which the company is established.
- A statement that the company has all the powers of a natural person with full capacity.
- The name of the first directors. There shall be at least two foundation (or first) directors.
- A statement that the powers of the directors are limited by section 202.
- In the case of a limited liability company, the regulation must contain a statement that the liability of its members is limited.
- For companies with shares, Regulation, must state the number of shares with which the company is to be registered. This is referred to as the authorized shares, ie the maximum number of shares that the company is capable of issuing.
(Any 5 points)
b) What is meant by “pre-incorporation contract”? (2marks)
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- The term, pre-incorporation contract, is a contract that is made between persons other than the subject incorporated company, in connection with the company, before incorporation.
c) State THREE features of a pre-incorporation contract. (3marks)
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- Parties to the pre-incorporation contract,
- Subject- matter of the pre-incorporation contract,
- the chronology i.e every pre-incorporation contract is made before the company is formed
d) Briefly explain how a company acquires interests in pre-incorporation contracts, and the legal position of a person purporting to act on behalf of the company with respect to those contracts. (10marks)
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- Any contract or other transaction purported to be entered into by a company prior to its formation or by any person on behalf of the company before its formation, may be ratified by the company after its formation, whereupon the company shall assume rights and liabilities under the contracts or transaction as if it had been in existence at the dated of such contract or transaction, and had been a party to it.
- Before ratification the promoter or other person purporting to act on behalf of the company remains personally liable in the absence of any express agreement to the contrary, and its entitled to any benefit accruing under the contract or transaction.
- If the promoter does not wish to incur financial or other loss under such contracts, he should ensure that the contract is so drawn up as to permit him to abrogate in the event of the company failing to ratify it after its formation.
- The reason for the promoters’ inability to be regarded as an agent in respect of the pre-incorporation contract or transactions derives from the general legal principle that a person cannot derive the powers and authority of an agent of a non-existent principal.