Failed Pre-Registration Contracts and the Statutory Remedy
Company and Securities Law Journal, Vol. 25, No. 4, pp. 226-245, 2007
24 Pages Posted: 2 Dec 2010
Date Written: November 30, 2010
Despite advances in technology and more sophisticated legal practices, it is still common for persons to arrange contracts on behalf of companies which are not yet in existence. These are called pre-incorporation contracts or pre-registration contracts. There is a tension between legal logic and practical reality. A company does not acquire legal personality until it is registered. So, how can such arrangements be legally binding if entered into before this time? The common law grappled with this problem in a largely unsuccessful manner. The problem has been resolved in many jurisdictions by statute. In Australia, the relevant provisions currently appear as ss 131 to 133 in the Corporations Act 2001 (Cth). The article examines the common law position and the changes made by statute. The article argues that the statutory position is an improvement, but there remain difficulties in applying it to real world situations.
Keywords: Corporations, Promoters, Pre-Incorporation Contract, Pre-Registration Contract
JEL Classification: K10, K12, K22, K30
Suggested Citation: Suggested Citation