Accounting Treatments for identifiable intangible assets
entered into, inorder for an unincorporated company to be actually recognized as a company. Given that entering into pre-registration contracts falls within Section 131 and in which a company is recognized as being registered, then that company will be bound by the contract and should that contract be ratified, they will be entitled to the benefits of the contract that was entered into. It has been recognized, mainly through statutory law, that once a company is actually formed, they will be permitted to adopt pre-registration contracts, that are intended to be entered into on that company’s behalf, and in which the liability that a promoter has incurred will be automatically eliminated. This has been the main reason as to why that pre-registration contracts are now highly uncommon due to the consequences of a promoter entering into a contract with another party, on the behalf of an unincorporated company.
It has been seen that he introduction of Sections 131 and 132 have had significant effects compared to its predecessor’s view of pre-registration contracts, that being the common law. Despite, pre-registration contracts now being highly uncommon, in the past, they were almost inevitable as promoters entered into these agreements inorder to gain business securities for the unincorporated company, that they were acting on behalf of. Consequentially, pre-registration contracts caused problems for all parties that were involved, especially the promoters, as they had to incur personal liability, despite acting on behalf of the unincorporated company. Therefore, a company cannot have an agent before it is registered, according to Section 131, because it is presumed under the law of agency, that a principal exists, during the time that the agent had initially entered into the contract. However, the company’s ratification of a pre-registration contract, must be within a specific type, after the contract has been created, or before any time that it is agreed to, by the parties that are involved in the contract. As a result, Sections 131 and 132 indicate that a promoter can gain protection from liability in pre-registration contracts. The introduction of these two highly important sections of the corporations legislation has ensured that pre-registration contracts are now a thing of the past.
2740 Words.
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