i) A company comes into existence on the date of incorporation. Before such date it does not exist and hence has no capacity to contract and cannot have agents. It was so held in Kelner v Baxter (1866).
- Whereas a company may benefit from contracts entered into before its incorporation it cannot, as a general rule be held liable on them. Such a contract cannot be ratified. It was so held in Natal Land Co. v Pauline CollierySyndicate as well as in Price v Kelsal, nor can directors of the company purport to adopt or affirm the contract after the company?s incorporation. It was so held in North Sydney Investments and another v Higgins and another. Such contracts can only be entered by or against the company if the company after incorporation enters into a new contract similar to the previous agreement. It was so held in Howard v Patent Ivory Co. Ltd
- In this case “Micromine Limited” has no enforceable rights on the contracts and cannot sue or be sued on them hence it is free from liability.
(ii) The contract may expressly provide that any amount or sum spent by Shem s recoverable from the company when incorporated. Problem however arises since the company is not privy to the contract and Shem cannot contract as the agent of the company. The articles of the company generally provide for the recovery of such expenses e.g. Article 80 of Table A. However such an Article is unenforceable by virtue of section 22 (1) of the Companies Act. Arguably therefore no provision in the contract can adequately protect Shem.
marto answered the question on February 6, 2019 at 08:42
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The shares of Promotion Limited, a private company are held by members of three families, that is, the family of Mr. Karanja, Mr. Mutisya...(Solved)
The shares of Promotion Limited, a private company are held by members of three families, that is, the family of Mr. Karanja, Mr. Mutisya and Mr. Otieno.
Mr. Karanja and Mr. Mutisya hold 90% of the company's shares. However, they feel that, the company is in need of further capital but due to the squabbles among the families, Mr. Otieno is not willing to inject additional funds so long as Mr. Karanja still holds any shares in the company. Further, Mr. Karanja and Mr. Mutisya have reasonable cause to believe and do in fact believe that the family of Mr. Otiengo is running their own business which is competing with that of Promotion Limited. It is known as a fact that Mr. Otieno is obtaining information as a member of Promotion Limited, which he is using to the benefit of his competing business.
To resolve the problems, Mr. Karanja and Mr. Mutisya propose to alter the company‟s articles of association by adding two new articles. The first article will enable the shareholders of 90% of the company's shares to compulsorily acquire the shares of the minority shareholder. The second one will require any shareholder who carries on competing business with company's business to transfer his shares to the nominee of the directors.
Required:
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Date posted: February 6, 2019. Answers (1)
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Happy co. Ltd was incorporated in January 2000 with an authorized share capital of 50,000,000 of one shilling per share which is fully issued and fully paid. The original articles of association gave the directors authority to issue the initial authorized share capital.
The directors are proposing to purchase a plot from Mr Karan for KShs.3,000,000 and to finance the purchase by a fresh issue of 2,000,000 shares at one shilling per share to Mr. Karan. In order to develop the plot they propose to raise further capital by issuing a further 2,000,000 shares of one shilling each. The directors propose that 1,000,000 of the shares should be offered to existing shareholders and 1,000,000 to the general public. The shares to Mr Karan, the existing shareholders and to the general public are to be offered at one shilling and fifty cents each.
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Date posted: February 6, 2019. Answers (1)
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Date posted: February 6, 2019. Answers (1)
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