Sem 1, 2, 3 Legal Nature of Companies, Pre-Incorporation Contracts and Promoters

COMPANIES & PROMOTERS A company is a business entity registered under the Companies Act (Cap 50)

MANAGEMENT STRUCTURE [p8]

Member Share

Contributions 2. Debt of capital made by the persons 1. Equity Capital who form Capital company and persons who become

CAPITAL STRUCTURE [p7- 8]

Stakeholders: Someone who is affected by actions of company or do something that affects the company. People who have a vested interest in the company: Directors and officers, shareholders, lenders (debtholders), employees, customers and suppliers, tort creditors, tax authorities, government regulators The sources of funds are: In case of a company limited by shares, the members (shareholders) provide money or property to the company, and receive a share or shares in return. A member of the company is a person who invested in and holds shares in the company.  expects that they will receive return on money if company is successful, either in form of dividends or growth of value of investment over time  have particular rights in relation to the administration of the co.’s affairs that depend on the law and the terms of issue of the shares Any legal person can be a member i.e. the member does not have to be a natural person (i.e., a human being) but may itself be a company. A share represents a number of rights that may or may not (depending on terms of issue of the share) include - control rights (such as voting rights and rights to receive information); and - distribution rights (such as a right to receive dividends or to share in the assets of the company on the winding up of the company).

The company can issue different classes of shares, with different rights attached to each class. Examples of classes of shares include preference shares and ordinary shares. From Companies Amount of credit advanced to the company by creditors/bank, including those who lend money to the company and those who (suppliers) supply goods and services on credit.

Persons who lend or advance credit to companies are not members of the company. Instead, they are in a contractual relationship with it. 3. Profits (if any) not distributed to the members Managing companies involves decision making: - Appropriate capital structure - Nature & form of company’s activities Management structure involves separation of responsibility for these decision between members & officers. Officers  Persons responsible for its management  Members and officers may be the same person (in small companies)  Only a natural person (i.e. a human being) can be appointed as an officer of the company Directors  Officers of the company  A collective group of >1 director is called board of directors  Usually responsible for managing the business of the company  Appointed in the manner agreed between the members and reflected in the company’s constitution Executive Directors are those who are employed by the company to manage the company’s affairs. Non-Executive Directors are those who are not employed in the company’s business and provide an “outsider’s” contribution and oversight to the board of directors.

Company Secretary [p125]  Officers of the company  Natural person who must have his/her principal or only place of residence in Singapore  All companies must have at least one  Appointed by directors  Directors are under a statutory duty to ensure that the persons appointed are persons who appear to them to have the requisite knowledge and experience to discharge the functions of secretary of the company  Responsible for certain administrative and reporting function set out by the law under S171 CA as amended by S88 of the Companies (Amendment) Act 2014  Public companies: Secretaries must meet statutory requirements (experience, professional and academic requirements and membership of professional associations, as may be prescribed)  The same person can be both a director and secretary except where the company only has one director NOTE: All companies (private or public) must have at least one shareholder and one director (who is a resident of Singapore and responsible for managing the company’s business), who can be the same person.

TYPES OF COMPANIES Advantages of Corporate Form: Page 70 Disadvantages of Corporate Form: Page 75 Singapore registered companies – Incorporated pursuant to the Act as defined by S4 CA Foreign company – Incorporated outside Singapore. Must register itself under the CA prior to setting up or conducting its business operations in Sg (Part XI CA) as a branch (not subsidiary) Sg vs. Foreign  Foreign companies are governed generally by Div 2 of Part XI CA. [p78] Except for provisions that make specific reference to the word “corporation”, the other provisions of Companies Act do not apply to foreign companies. Limited Liability – Shareholders in a company limited by shares are not liable to contribute additional money to meet the company’s debts, beyond the amount initially agreed to be paid for the share.  Companies limited by shares - Most common and appropriate form of company in Singapore. - Members have purchased shares by making a contribution to the company. If the company becomes insolvent, the members generally are not required to make any further contribution to meet the company’s debts. - S4 CA: “a company formed on the principle of having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them”

Limited vs. Unlimited [p79]

 Companies limited by guarantee - Liability limited to the respective amounts that the members guarantee to contribute to the property of the company if it is wound up. - Members do not have to put in money when the company is set up and are not liable as long as the company remains a going concern. - Often used for non-profit activities such as churches, independent schools and institutes of public character. - Regarded as public companies. Note: A member of a limited company may agree separately with a creditor to assume responsibility for a company’s debts in certain circumstances e.g. guarantee (promise to pay another person’s debts if he defaults), cross guarantee (each individual company is required to guarantee the debts of every other company in the grp)  Provides alternative means of recovery, under contract. Unlimited companies – Members have no limit placed on their liability to contribute to the company’s debts - Very rare in Singapore. - Usually incorporated to comply with legislation or rules of some professional body. Eg. Architectural industry; Unlimited firm OR $1 million of paid-up capital to be Limited firm. Conversion may only take place once Lodge an application with Registrar and also submitting documents prescribed in S30(4). Registrar may then direct the notice of change be published.

Public vs. Private [p80-82]

S18(1) CA - Private companies (Pte Ltd or Sdn Bhd) may only be incorporated if their constitution  restrict the rights to transfer shares (usually takes the form of requiring board’s approval before any transfer, or of giving members right of first refusal or “pre-emptive right” to purchase shares)  ≤ 50 members Enjoy greater flexibility & subjected to less rigorous regulatory regime than public companies: 1. Private co. are not subject to the S64A requirement to make specific provision in the constitution for the issue of different classes of shares and the rights attached to each such class, should they wish to issue different classes of shares 2. May arrange to dispense with AGM S175A 3. May arrange to pass members’ resolutions by written means w/o the need to hold a physical meetings S184A-F 4. Period of notice required for the passing of a special resolution by a private co. is shorter than that required of a public co. S184 5. Possible for private co to arrange matters such as: no need to lay accounts before an AGM S201C 6. No need for secretary of private co. to be a professional lawyer/accountant/qualified person S171 S4(1) CA - Exempt private companies is:  a private company  ≤ 20 members  where no corporation has a direct or indirect beneficial interest in the co. (SH cannot be a co.) Exempt private companies are excused from some regulatory provisions: can make loans or provide financial assistance to directors or persons related to them (S162, S163) There is no need to file financial statements with its Annual Returns (only if the company is solvent) Para 2 Thirteenth Schedule CA – Company is a Small Company (Exempted from audit requirements S205C) for a particular FY if:  it is a private company throughout the FY  it satisfies any two of the following criteria for each of the two FY immediately preceding the FY: a. the revenue of the co. for each FY does not exceed $10m b. the value of the company’s total assets at the end of each FY does not exceed $10m c. it has at the end of each FY not more than 50 employees A company will cease being a small co. under the Act if it ceases to be a private co. at any time during the FY or if it does not satisfy any 2 of the 3 criteria listed above for 2 consecutive FY immediately preceding the FY in question. Small companies that are either holding companies or subsidiaries in a group of companies will only qualify for this exemption if they are part of a “small group” (paras 7-13 Thirteenth Schedule CA) S4 CA - Public company is any company that is not a private company. [Determine Pte first, before Public]  > 50 members  Have public shareholders  Engage in activities permitted to only public companies  More regulated than a private company Public co. may be listed or unlisted (charity, SG zoo); however, all companies listed in SGX are public. Listed company is a company that has shares listed for quotation on the SGX. Members of the public can buy and sell shares in the company through the stock market operated by SGX.

To convert from private to public: - Pass a special resolution determining the conversion, specifying change to company’s name (e.g. dropping “Pte”), and which must be lodged with the ACRA together with other prescribed documents. ACRA will then issue an altered notice of incorporation reflecting change in status. - Also open to court or Registrar of Companies to declare that a private company has ceased to be such where events occur such that it no longer falls within definition of “private company” in S18 CA. To convert from public to private (assuming managed to “de-list” from SGX if listed): - Lodge with ACRA a copy of special resolution determining the conversion, specifying appropriate name (eg inserting “Pte”), accompanied by copy of special resolution altering company’s constitution to include restrictions and limitations in S18 CA. - A list of persons holding shares in the co. and other information relating to the co. or its members and officers as prescribed by ACRA will also need to be lodged. Change effected upon issue of an altered notice of incorporation by ACRA. Such changes do not create a new legal entity or affect the co.’s existing relationship with outsiders.

CORPORATE GROUP [p91] companiesAssociated companies,Holding

“Corporate group” is used to describe a situation where control of one or more companies is in the hands of another company. Generally, company law treats each company in a corporate group as a separate entity. S5 CA states that a company is a subsidiary of another company (holding company) if: (satisfying any) 1) the holding company controls the composition of the subsidiary’s board of directors “by the exercise of some power exercisable by it without the consent or concurrence of any other person can appoint or remove all or a majority of the directors” 2) the holding company controls more than half the voting power of the subsidiary 3) the holding company holds more than 50% of the issued share capital (excluding non-voting preference shares) of the subsidiary, or 4) the subsidiary is a subsidiary of another subsidiary of the holding company Defined in SGX Listing Manual: Company in which at least 20% but not more than 50% (20%-50%) of its shares are held by a listed company or group. No definition in CA. Accounting, not a legal, concept.

Special rules that apply to corporate groups [p93]:  Related party transactions  Financial Statements: Consolidated financial statements & group reporting & disclosure allowed  Exemption from some prohibitions against loans: S163 does not apply. Companies in the same corporate group often financially assist one another to ensure group viability.  Register of directors’ shareholding: Directors are to inform company of shares or debentures that they hold, not only in company itself but also of interests in shares or debentures that they have in related companies

RECORD KEEPING Company’s registered office (manned by company secretary) [p356]: A company must, from the date of incorporation, have a registered office within Singapore, to which all communications and notices may be addressed and which shall be open and accessible to the public for not less than three hours during ordinary business hours on each business day. S142 Financial records [p359]: All companies are required to keep certain records under the CA. These includes financial records, minutes of directors’ and members’ meetings and resolutions, and various registers. S199(1) Minute books [p361]: S188(1) requires the company to keep minute books in which it records within one month of the date the relevant meeting was held… S188(3A) requires every company to enter in its minute books these matters…

Registers to be maintained by company (effectively by company secretary) [p362]: The CA and SFA require a certain registers to be kept and maintained. They are:  Register of members, where the company is a public company  Register of substantial shareholders, where the company is listed on the SGX or a body corporate incorporated in Singapore  Register of debenture holders  Register of directors, chief executive officers, secretaries and auditors (if any)  Register of director’s shareholdings and chief executive officer’s shareholdings  Register of charges

INCORPORATION Documents required: Constitution required for registration and incorporation of a company under S19 CA

Separate Legal Entity [p36]

Procedure for incorporation - Apply for the proposed co’s name: online app through Bizfile - Name directors, company secretary, registered office, accompanied by constitution - Registrar will then issue notice of incorporation Effects of Incorporation S19(5) CA: (1) Creation of a body corporate (2) Separate legal personality (3) Ability to own property (4) Members are not liable for debts of the company (5) Ability to sue and be sued (6) Perpetual succession General Rule The law treats a company as being a separate and distinct entity from its members and those who manage its operations. This is the doctrine of separate legal personality – Legal action must be taken by/against the coy. Salomon v Salomon Co Held that despite the fact that Mr Salomon controlled the company, it was not his agent or trustee. The company was treated as operating the business in its own right, and as being separate from its controller, Mr Salomon.  Charge given by co. to Mr Salomon was valid and he was entitled to be paid before other creditors, despite co. having insufficient assets to pay all creditors. Salomon treated as creditor, not shareholder. [p38] Consequences of Separate legal entity [p39] Similar to the effects of Incorporation: (1)

A company’s (contractual) obligations & liabilities (in tort) are its own and not those of participants: Members are not personally liable for debts of company. Third party can only chase company, not members.

(2)

Company’s rights are its own and not those of its participants: It is the company itself that is to enforce its rights in its own name. Individual participants are not permitted to enforce or enjoy rights that belong to the company in their personal capacity.

(3)

Can sue and be sued in its own name: Not necessary for members or officers to be named as parties to the legal proceedings where the proceedings only involve the company. S19(5) Eg. BoD steals $, shareholders cannot take action, only company.

(4)

Has perpetual succession: It is a continuing entity in law with its own identity regardless of changes in its membership, until it is deregistered under the statutory procedure set out in the CA.

(5)

Ability to own property: Company’s property is not property of its participants. Macaura v Northern Assurance Co Ltd. Mr Macaura transferred his interest in timber plantation to the co. Had insurance for timber in his own name – fail to transfer to co.  insurance unclaimable as Mr M no longer has ‘insurable interest’ in timber. The company was the owner of the timber.

(6)

A company can contract with its controlling participants: Lee v Lee’s Air Farming Ltd. Separate legal personality doctrine applies in the case of one director or one shareholder company – controlling S/H + MD is separate from company. Salomon case: Can lend/borrow money from controlling S/H.

Separate legal personality doctrine apply in the case of a 1 director company & a group of companies because though they are run as one business in an operational sense, at law, each company is treated as separate and has distinct personality.  Useful as limit liabilities through the structure of subsidiary companies (common in the shipping biz: 1 ship: 1 company, so damage incurred by 1 biz will not affect other businesses).

Exceptions to General Rule i.e. Lifting of Corporate Veil [p40] Pierce the corporate veil! The legal rules that separate the company from its participants are referred to as the “corporate veil”. Exception to the separate legal entity doctrine: Courts sometimes asked to “lift the corporate veil” and ignore the separate personality of the company.  The law will disregard or look behind the corporate personality to have regard to the realities (i.e. treat the rights and liabilities of the company as the rights and liabilities of the controller)  hold director/holding co. liable. Argument for Exception: Chose coy B to contract, knowing that coy B is thinly capitalized & has no assets. The contract should have terms to protect coy A from any risk from coy B. A prudent and reasonable coy (A) should have protected their interests knowing so. But generally, the law will respect company’s modesty & decline to lift the veil i.e apply restrictively & not liberally. Corporate veil will be lifted where (Judicial exceptions for wrongdoing) Courts do not want to be seen as siding the wrongdoers. (1) Corporate form is used to avoid an existing legal duty If a company is formed for the “sole purpose of or for dominant purpose” of doing something that one of the participants is prevented from doing in its personal capacity through an existing legal obligation, the courts may pierce the veil to treat obligation that binds participant as one that also binds the company.

Jones v Lipman - Lipman contracted with Jones to sell land to them. Lipman transferred the land to the company controlled by him before sale was completed. It was held that the company had been used by Mr Lipman as a device to avoid his existing contractual obligations and the court pierced the corporate veil and treated the contractual obligation on Mr Lipman to transfer the land as also binding on the company. General Law [p42]

Separate Legal Entity [p36]

Gilford Motor Co Ltd v Horne - Mr Horne has been employed as a MD of Gilford Motor and has a noncompete clause in his employment contract. Horne set up a co. (JM Horne) to solicit clients of Gilford Motor. The shareholders of JM Horne were his wife and one of his business associates. JM Horne conducted the rival business & Mr Horne ran the co. He argued that it was the co. that solicited the customers of Gilford Motor & not him personally. Held that the co. had been formed for the sole or dominant purpose of avoiding the non-compete clause and the court was prepared to treat the co., along with Horne, as being bound by it.

The above should not be confused with the use of the corporate form as a means to provide limited liability in the ordinary course of the business. One of the main reasons for using a company is to take advantage of the limited liability. This is a normal and acceptable reason for using the company as a vehicle for doing business. It is also likely that a company should not be allowed to be formed or used for the purposes of avoiding a public law obligation (such as a rule of criminal law or a regulatory standard) either. (2) Company is being used to perpetrate a fraud or to enter into a sham transaction/facade A person will not be allowed to commit a wrong through a company that he controls and then assert that it is the company that is to bear responsibility for the wrong. Eg. set up company to carry out illegal dealings. Fraud = Need to show FRADULENT INTENTION AT TIME OF TRANSACTION. When co. was incorporated does not matter. But difficult to show and prove. Sham/Façade = No need to show intention to cheat. The way you manage the co. is a sham. Is the co. doing anything or not? Company is not there. Set up for nothing. Properly set up? Really run as a separate entity? Proper documentation? Has resources? Re Darby – Incorporated CLIC to act as promoter for Welsh. CLIC sold license to Welsh at inflated price. Darby asserted that it was CLIC who was Welsh promoter and that any claim should be directed at CLIC as a separate legal entity. Court held to pierce the corporate veil as not to do so would enable Darby to get away with the fraud that he had schemed. Claimed against Darby since he planned and benefitted from the scam. Children’s Media Ltd and others v Singapore Tourism Board – STB entered into contract with a UK company, CM to stage an event and paid CM a total of $6,155,250. CM was a wholly owned subsidiary of ML, which was solely owned by an individual, AH. AH was at all material times a director and CEO of both CM and ML. Held that AH had no intention to stage the event in Singapore when he entered into the relevant agreement in the name of CM. The court of appeal held that AH should be liable to refund the sums paid to CM. In the words of VK Rajah JA: “The first and second appellants were no more than corporate puppets compliantly dancing to the tune of the third appellant. He treated their assets as his own. Their liabilities arising from the failure to stage the event should now also be his.”

(3) Company’s controller is its alter ego or is acting as the agent or partner of the controller If a company were treated as the agent of a person who controls it, any rights or obligations of the company arising under the scope of agency would be treated as rights or obligations of the controller  piercing corporate veil Alwie Handoyo v Tjong Very Sumito and another and another appeal – Held that the sole shareholder and director of a company, Alwie, was personally liable to repay sums which the company, OAFL, was held to be liable for on the grounds that Alwie was OAFL’s alter ego. Whether the corporate veil should be pierced depends on whether or not the company is carrying on the business of its controllers. Strong evidence of this would be where the controllers do not make any distinction between the company and themselves in relation to the business being carried on. Matters such as: (focus on controller for alter ego) (1) Purpose for which the company was set up (2) Whether or not there was proper separation of funds and accounts between the company and its controller (3) The degree to which the controller controlled the business of the company (company carrying on business of controller and more like company is extension of controller) However, the mere fact that one is a controlling shareholder without more is insufficient to support a finding that one is the alter ego of the company. Application of Agency Law: It is possible for a company to be the agent or partner of its controller. We saw in Salomon’s case that the fact that a person controls a company is not sufficient to make the company an agent of the person. If a person incurs an obligation or holds a right as agent for another person (called the principal), then the right or obligation belongs to the principal. Therefore, if a company were treated as the agent of a person who controlled it, any rights or obligations of the company arising under the scope of the agency would be treated as rights or obligations of the controller. This would have the effect of piercing the corporate veil. Some indicative factors for Principle-Agent Relationship (guidelines only): (1) Indication of consent to agency relationship? **Fatal for a Principle-Agent r/s!! (2) Are there any differences between the two businesses? – pay market rate/nominal sum for resources/nominal paid-up capital/commission only? (3) Is there any “separatedness”? i.e. different bank account or invoices or documents  performing biz in own right. (4) Corporate financial control? Functional Unity – Unity of control and ownership? (5) Genuine Commercial reason? (6) Subsidiary does not = agent (must have indications that parent co. wants to use sub. to sign contracts on its behalf) Qn to ask: Is the company grossly under-resourced that it can’t run independently? In limited circumstances, English courts have treated the company as the agent or the partner of its controllers, where the company was clearly under-resourced to carry on the activities for which it was formed and did not operate independently in any way from controllers. Instances of such would be that the company did not have any office, no staffs, no assets and the negotiations are conducted by the controllers. Smith, Stone & Knight Ltd v Birmingham Corporation (Principle suing 3rd Party) – The parent company that controlled its subsidiary successfully argued that the subsidiary should be treated as carrying on its business as agent for the parent company, entitling the parent company to receive compensation for disruption to its business when the premises on which the business was conducted were compulsorily acquired by the local council. (Case law for guidelines on Principle-Agent, guidelines ONLY). Miller Freeman Exhibitions Pte Ltd v Singapore Industrial Automation Association & Anor – SIAA is a society and it set up a company SIAA Pte Ltd with $2 paid up capital. SSIA was the sole shareholder of SIAA Pte Ltd and it managed the company. Its office-bearers were also the directors of the company and both the organizations shared the same office addresses. SIAA Pte Ltd entered into a contract with MF and a dispute arose under the contract. SIAA Pte Ltd entered ctts as Principal, had separate bank accounts and recorded profits in their own books. It was held that the company was a totally separate entity from the association and the correct party to take action against under the contract is SIAA Pte Ltd and not the association.  Company is set up to defend assets (legitimate reason)  Just because same office-bearers & it is a $2 co. (even though some indicative factors are there) does not mean it is a sham and you can lift corp. veil.

Wrongful or fraudulent trading provisions Corporate veil will be lifted if:

(2) S339(3) CA Insolvent trading happens when any officer of a company knowingly be a party to the contracting of a debt by the company where, at that time of the contracting of the debt, there was no reasonable or probable ground of expectation of the company being able to pay the debt. The person will be made personally responsible for the payment of the whole or part of the debt. [DIRECTORS’ DUTY NOT TO ENGAGE IN RECKLESS TRADING – p242] Other statutory provisions: Statutory [p49]

Separate Legal Entity [p36]

(1) S340(1)CA Where the business of the company is carried on with intent to defraud creditors or creditors of any other person or for any fraudulent purpose, the person who was knowingly a party, will be personally liable for all or any of the debts or other liabilities of the company. This can only be invoked when the company is being sued or wound up.

(1) S145(10) CA states that if a company carries on business without having at least 1 director who is ordinarily resident in Singapore for >6 months, any member who knows that the company is carrying on business in that manner shall be liable for the payment of all the debts of the company contracted during the period that the business is carried on in such manner with the member’s knowledge. (2) S144(2) CA states that where an officer of a company signs or authorizes to be signed on behalf of the company a bill of exchange, promissory note, cheque or order for goods or money in which the company’s name does not appear, the officer is liable to be fined or may be made personally liable to the holder of the document or order for the amount reflected on it if the company defaults on payment. Personal liability may also be imposed where “limited” or “berhad” are omitted from company’s name in the instrument. (3) S403(2) CA states that directors who willfully pay or permit to be paid dividends where there are no profits available, the directors may be held personally liable to the creditors of the company. Personal liability is to the extent by which the div paid exceed profits, and may be recovered by creditors or liquidator. (4) S33 of Income Tax Act states that Comptroller can ignore the separate personality principle in cases where a company is used to for the purpose of altering the incidence of tax on a party or otherwise evading or avoiding any liability to tax. He has the power to adjust tax liability of a person where there exist artificial or fictitious transactions/dispositions for purpose/effect of evading tax liability.

PRE-INCORPORATION CONTRACTS [p86] There are 2 conditions to make a pre-incorporation contract binding on the company and for the company to be entitled to the benefits of the contract: S41(1) CA (1) The contract must purportedly have been entered into by the company or person on behalf of the company prior to its incorporation (2) Company must ratify (ratification is an entirely discretionary and voluntary act of the company) a. Express Ratification: Expressly stated b. Implied Ratification: By conduct Retrospective effect: Liable since time when contract formed, not point of ratification. If agent is sued after coy ratifies? CA is silent. Common Law practice: Agent released from all obligations when principal ratifies as it is in the intention of parties to make co. solely liable if ratification has occurred unless there is a term to the contrary. If company changes name, from A to AA, can the company ratify contract? Yes. Changing name does not change the legal entity. Is AA actually A? Was it intended to be the same entity when you create AA? If yes then can ratify. If AA is different entity then can’t. But now Singapore has UEN to identify company. If promoter buys a shelf company and changes the name to A, if the shelf company existed at the time of the contract, S41(4) is inapplicable and it is suggested that ratification under normal principles can take place. If shelf company incorporated after the contract under a different name and its name is changed to A, S41(1) allows ratification. Prior to ratification by the company, the person (ie. promoter) who entered into the contract on the company’s behalf is, in the absence of any express (verbal or written) agreement to the contrary (an expressed agreement to prevent incurrence of liability), personally bound / liable by the contract and is entitled to the benefit of it under S41(2) CA. The other party may not withdraw from the contract prior to ratification. This is because the contractor is entitled to insist on performance. For ratification of pre-incorporation contracts to be effective: (1) ratification must be absolutely voluntary (P cannot force coy to ratify) (2) within specified time in contract, or if not specified, within reasonable time (3) may be express (e.g. resolution passed during the board of directors meetings) or implied (e.g. acceptance of goods delivered, payment made, unequivocal interpretation of the actions by the coy) Can a company change the terms of contract when it purports to ratify? No. Cosmic Insurance Corp Ltd v Khoo Chiang Poh – The resolution amounted to ratification of the pre-incorporation contract. Held that notwithstanding the difference in terms between resolution and letter, company ratified accordingly via M&A. **Ratification is according to the terms of the contract, cannot be varied. S2 of Contracts (Rights of Third Parties) Act: A contract may be enforced according to its terms by a person who is not a party to it if: (1) the contract expressly provides that he may; or (2) the term purports to confer a benefit on him The third party shall be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.  Companies may also enforce terms of contracts that entered into on their behalf prior to their formation.

PROMOTERS [p87] As established in Twycross v Grant, “a promoter is a person who undertakes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish that purpose.”

andRemedies Law DutiesCommon

Promoters are generally individuals or another company/companies who take steps in establishing a new company and engaged in the process of company promotion. *Acts in good faith for the company. 

Promoters owes fiduciary duties to the companies that they promote They are in a position of trust and to act in the interest of the company similar to that of directors. Duty to act with reasonable care and skill  Standard of reasonable man  Remedy is damages if company suffer a loss When promoter sells property to company: - No profit can be made at all UNLESS full & frank disclosure made - *If promoter is first director – can make full disclosure to yourself o o

(1)

The company has the option of rescinding the contract (i.e., returning the property and recovering any sums paid to the promoter). If rescission of a contract entered into by the company with a third party is