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Ratification of the pre-incorporated contracts The promoters can follow either of the methods stated below for such acceptance or ratification: 1. Accept the contracts by passing a contract acceptance resolution and the action of promoter for incorporating the company and related matters.

Before a company is incorporated, it has no legal existence. ingly, it has no capacity to enter into a contract. The company cannot sue or be sued on a pre-incorporation contract. However, persons who conclude contracts for the unborn company can be held personally liable on such contracts.

What are promoters of a company? A promoter is a person or entity who settles on an idea to establish a specific business and completes the required formalities for its establishment. An individual, company, firm or association can conceive the idea of company formation and be the company's promoter.

The promoter is considered to be liable to fulfil the obligations of the corporation. It happens in case the corporation is not formed or does not adopt the contract. At the time of the signing the pre-incorporation contract, the corporation does not exist and thus, cannot be part of the contract.

The promoter acts as the representative and becomes a party to the contract. He then becomes legally obligated as an agent acting behalf of the company which has not been incorporated yet.

The promoter can enter into preliminary contracts on behalf of the company. Promoter has the right to receive remuneration. However, there must be a valid contract for remuneration. He has the right to receive legitimate preliminary expenses.