CONTRACTS MADE BY PROMOTER/PROMOTERS

A company is an artificial judicial person. Hence a company can’t act in itself. Usually all the acts of a company are done by its agents. Under different stage of a company such agents are known in different name.

Before a company registering as a separate entity it goes into two or more legal stages. A person or a group of person known as promoter or a group of promoter takes all the initiatives to form a company. Basically they entered into various contract on behalf of a company which is yet to be registered. Promoter or group of promoters takes the entire necessary step which is required to form a company. They mainly act untill the company entitled to commence business.  All the contracts made by the promoter on behalf of a company have been classified into three categories:

1.       Pre-incorporation/preliminary contract.

2.       Provisional contract.

3.       Contract after entitled to commence business.

Pre-incorporation contract refers to a contract which a promoter or promoters enter before a come in to existence.

Provisional contract has been discussed in detail in a separate blog.

Contract made after entitled to commence business refers to a contract which is made after getting registration as separate entity.

Contracts on behalf of a company having no share capital shall be classified as pre-incorporation contract and contracts made after entitled to commence business. There is no provisional contract in case of a company having no share capital.