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Companies Act, 2008 (Act No. 71 of 2008)

Chapter 2 : Formation, Administration and Dissolution of Companies

Part B : Incorporation and legal status of companies

21. Pre-incorporation contracts

 

 

1) A person may enter into a written agreement in the name of, or purport to act in the name of, or on behalf of, an entity that is contemplated to be incorporated in terms of this Act, but does not yet exist at the time.

 

2) A person who does anything contemplated in subsection (1) is jointly and severally liable with any other such person for liabilities created as provided for in the pre-incorporation contract while so acting, if—
a) the contemplated entity is not subsequently incorporated; or
b) after being incorporated, the company rejects any part of such an agreement or action.

 

3) If, after its incorporation, a company enters into an agreement on the same terms as, or in substitution for, an agreement contemplated in subsection (1), the liability of a person under subsection (2) in respect of the substituted agreement is discharged.

 

4) Within three months after the date on which a company was incorporated the board of that company may completely, partially or conditionally ratify or reject any pre-incorporation contract or other action purported to have been made or done in its name or on its behalf, as contemplated in subsection (1).

 

5) If, within three months after the date on which a company was incorporated, the board has neither ratified nor rejected a particular pre-incorporation contract, or other action purported to have been made or done in the name of the company, or on its behalf, as contemplated in subsection (1), the company will be regarded to have ratified that agreement or action.

 

6) To the extent that a pre-incorporation contract or action has been ratified or regarded to have been ratified in terms of subsection (5)—
a) the agreement is as enforceable against the company as if the company had been a party to the agreement when it was made; and
b) the liability of a person under subsection (2) in respect of the ratified agreement or action is discharged.

 

7) If a company rejects an agreement or action contemplated in subsection (1), a person who bears any liability in terms of subsection (2) for that rejected agreement or action may assert a claim against the company for any benefit it has received, or is entitled to receive, in terms of the agreement or action.