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Pre-incorporation Contracts
What is a pre-incorporation contract?
A pre-incorporation contract is a legal agreement on behalf of a juristic person (such as a company) that is still to be formed. The problem is that under common law, you can’t have legal representation for a juristic person that doesn’t exist yet. This can be bypassed by way of Stipulatio alteri, which means that a person acts as a principal on behalf of a third party.
Stipulatio alteri is a contract between two people for the benefit of a third party. This is why, when you are forming a company, you need a stipulatio alteri contract to give this future company legal representation.
What does the Companies Act say about companies not yet incorporated?
The Companies Act 61 of 1973 allows companies to conclude pre-incorporation contracts in terms of s 35. This section allows a person to act as an agent or trustee for a company that does not exist yet. When the company is incorporated, this contract can be adopted by the company provided that you have complied with the requirements of this section of the Companies Act, namely:
- The contract was made in writing
- The memorandum of association of the company on its registration contained as an object of the company the adoption or ratification of or the acquisition of rights and obligations in respect of such contract
- The person who made the contract professed to act as agent or trustee for the company
Two copies of the contract have to be lodged with the Registrar of Companies with an application for the registration of the company. One of these two copies has to be certified by a notary public.
Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.
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