QUIZ 2 : COMPANY LAW (3%)

PROMOTERS AND PRE - INCORPORATION CONTRACTS

1.Using your own words, define the meaning of “Promoters”.

Answer:

-A person who has control over the affairs of the company, directly or indirectly whether as a
shareholder, director or otherwise

-A person who is in agreement with whose advice, directions or instructions the Board of Directors of
the company is accustomed to act.

2.What is the meaning of fiduciary duty?

Answer:

-Principally, promoters must act in good faith which entails:

- disclosure of profits at the expense of the company(Gluckstein V Barnes)
- disclosure of personal intrests through company transactions(Erlanger v. New Sombrero Phosphate co)
- make good to the co what is obtained as a trustee
-disclose private arrangements resulting him to profit from the promotion of a company
-give benefit of negotiations to the company in E case he should see that there is a board of directors
and disclose any interests and profit to company and intending members
- act in good faith. not to misuse his position

3.What are the consequences for the breach of fiduciary duty?

Answer:

-If the promoter breached his fiduciary duties, it is the company who may take legal action against the
promoter. The promoter owes fiduciary duties towards the company to act in good faith and to ensure
that there is no conflict of interest.

4.Explain the procedures of pre-incorporation.

Answer:

Common Law
A contract entered on behalf of company before its incorporation is known as a pre-incorporation
contract and a promoter will usually be personally liable on the contract. is void

position under section 54

A pre incorporation contract is voidable. it is at the choice of a company."a contract which purports to
be made on behalf of a company before of a company before the company is formed, has effect, as one
made with person purporting to act for the company."

5.Does a pre-incorporation contract bind a company upon its incorporation?

In January 2022,Company A agreed to enter into a pre-incorporation contract with Company B, whereby
Company B will supply the fabrics and textile. However, in Mac 2022, Company A had become an
incorporation company. Company A received the textile and fabrics supplies from Company B.

Whether the pre-incorporation contract binds Company A? Is there any ratification made by Company
A?

Answer:

Samada wujud perkongsian antara syarikat A dan syarikat B,menurut seksyen akta perkongsian
1961.Terdapat element penting dalam pra diperbadankan ialah syarikat iti tidak wujud secara sah pada
masa kontrak pra pemerbadanan jika seseorang tidak berada dalam kewujudan undang undang ,maka
dia tidak boleh menjadi pihak dalam kontrak and ‘privity to contract doctorine ‘mengecualikan
syarikat.selain itu,daripada liability sebuah syarikat wujud pada tarikh penubuhan.promoter membuat
kontrak bagi pihak syarikat sebelum tarikh penubuhan contohnya premis,perabot dan kakitangan.

Jawatan Common Law: Syarikat hanya wujud apabila sijil pemerbadanan dikeluarkan oleh Pendaftar
Syarikat. Sehingga pemerbadanan syarikat tidak boleh terikat dengan kontrak yang dibuat atas
namanya atau bagi pihaknya: ia tidak wujud. Walau bagaimanapun, sebagai sebahagian daripada proses
pemerbadanan, penganjur secara amnya akan menandatangani kontrak dengan pihak ketiga untuk
perkara seperti pajakan premis dan sambungan kepada utiliti supaya apabila pemerbadanan selesai
syarikat boleh memulakan dagangan tanpa berlengah-lengah. Sehingga diperbadankan, tiada
personaliti undang-undang, tiada kapasiti kontrak - tidak terikat dengan kontrak pra-pemerbadanan.

Kes: Re English & Colonial Produce Co

Fakta 1: Peguam cara, atas arahan orang yang kemudiannya menjadi pengarah syarikat, menyediakan
memorandum dan artikel persatuan syarikat, dan membayar yuran pendaftaran. Dipegang, syarikat
tidak bertanggungjawab untuk membayar kos mereka.

Fakta 2: Seorang peguam ditugaskan untuk menyediakan dokumen yang diperlukan dan mendaftarkan
syarikat. Dia membayar yuran pendaftaran dan menanggung perbelanjaan tertentu yang berkaitan
dengan pendaftaran. Mahkamah memutuskan bahawa syarikat itu tidak terikat untuk membayar
perkhidmatan dan perbelanjaannya.

Jadinya syarikat A tidak terikat pra pemerbadanan kerana tidak memenuhi element tersebut.