Page 53 - DCOM106_COMPANY_LAW

Company Law

Notes certificate was conclusive evidence of incorporation on January 6th and that the allotment was
not void on the ground that it was made before the company was incorporated.
However, if a company has been incorporated with illegal objects, the illegal objects would not
become legal by the issue of the certificate.
Section 36 states that, on registration, memorandum and articles of the company bind the company
and its members to the same extent as if they respectively had been signed by the company and
by the members and contained covenants on its and their part to observe all the provisions
contained in the Memorandum and Articles.
Self Assessment

5. The companies which are formed under special charter granted by the king or queen of
England are called.

(a) Statutory companies (b) Registered companies
(c) Chartered companies (d) None of these
6. The companies which are formed under special Act. Those companies are called as
(a) Chartered companies (b) Statutory companies
(c) Registered companies (d) None of these

7. The companies which are formed under companies Act. 1956. They will be called as
(a) Chartered companies (b) Statutory companies
(c) Registered companies (d) None of these

8. If the guarantee Co. is having no share capital, the liability of shareholders will be
(a) To the extent of guarantee (b) Unpaid value of shares
(c) Unlimited (d) None of the above

4.4 Pre-incorporation or Preliminary Contracts

We have mentioned earlier that a company is an artificial person and is capable of entering into
contracts. The promoters may enter into contracts with third parties on behalf of the proposed
company before obtaining the certificate of incorporation or after obtaining the certificate of
incorporation but before obtaining the certificate to commence business. Thus, in the case of a
public company following are the three situations when contracts may be entered into:

1. Contracts before incorporation
2. Contracts after incorporation but before obtaining the certificate to commence business
3. Contracts after obtaining the certificate to commence business.
However, in the case of a private company, as it is not required to obtain the certificate to
commence business, there are only two situations, i.e., (i) contracts before incorporation; and
(ii) contracts after incorporation.

Those contracts which are entered into by promoters for the intended company before registration
of the company are known as pre-incorporation or preliminary contracts. Very often a company
is formed to purchase an existing business or other property. In such circumstances, the promoters
enter into contracts with the owners of the business or property to be acquired by the proposed
company.

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