Formation of a company Flashcards
(18 cards)
Who is a promoter of a company?
A person who undertakes to form a company and takes the necessary steps to accomplish that purpose.
What are the duties of a promoter?
A promoter organizes company formation, finds directors, makes statements for share invitations, pays preliminary expenses, and acquires assets for the company.
What is the fiduciary duty of a promoter?
A promoter must act in the best interest of the company and not make secret profits.
What happens if a promoter makes a secret profit?
The company can recover the profit, rescind the contract, or sue the promoter for breach of duty.
What is a pre-incorporation contract?
A contract made on behalf of a company before it is legally formed.
Who is liable for a pre-incorporation contract?
The promoter is personally liable unless the company ratifies the contract after incorporation.
What did the case Nali Farms Ltd & Khoromana v National Seed Co. of Malawi establish?
A company cannot sue on a pre-incorporation contract unless it adopts it.
What did the case Zikomo Flowers Ltd v Finance Bank Malawi Ltd establish?
If a company adopts a pre-incorporation contract, the promoter is not liable.
What is incorporation?
The process of legally registering a company as a separate legal entity.
What are the main steps to incorporate a company in Malawi?
Filing an application with the Registrar of Companies, providing shareholder and director details, and submitting written consent from key officers.
What are the key contents of an application for incorporation?
Names and addresses of applicants, directors, shareholders, company type, registered office, and share details.
What is a statement of capital?
A document that outlines the total number of shares, rights attached to them, and their value.
What did the Companies Act 2013 change about share capital?
It abolished the concept of ‘authorized share capital’ and replaced it with the ‘statement of capital.’
What is a certificate of incorporation?
A legal document issued by the Registrar confirming that a company has been legally formed.
What is the legal effect of a certificate of incorporation?
It provides conclusive evidence that the company exists and has met all legal registration requirements.
Can a company be invalidated due to a registration defect?
No, a certificate of incorporation is conclusive proof of a company’s existence.
What did the case Union Bus Company v General Tyre Merchants Ltd establish?
Once a company is incorporated, it is legally recognized even if some registration formalities were missed.
What is the significance of a certificate of incorporation?
It proves the company’s legal status and allows it to conduct business as a separate legal entity.
