Incorporation of companies and lifting the veil

Question 1

What is a pre-incorporation contract?

Answer 1

A contract entered into by a promoter on behalf of the company before it exists itself.

Question 2

What are the requirements of pre-cont?

Answer 2

The statutory approach states, under section 179, it should be done in writing and signed by an agent/ trustee with a certificate from a principle.

Question 3

What are the liabilities of a promoter?

Answer 3

Section 180 states that the pre-cont creates an implication that;
1) Co will ratify the contract in time but until then the promoter is liable.
2) An affected person may request for pre-cont to be validated, interdict or other relief.

Question 4

What are the main 4 consequences of incorporation?

Answer 4

1) Under section 24; Legal personality
2) Seperation on ownership and control
3) Perpetual succession
4) Limited Liability

Question 5

Whats the meaning of lifting the veil?

Answer 5

When the company’s no longer considered a legal entity.

Question 6

How is the veil lifted?

Answer 6

1) Statue: Incorrect use of names(personally liable) AND MD completing transactions aware of the co’s lack of going concerns.
2) Judicial/Courts: Happens in exceptional cases where the law is broken for the purposes of seeking out a particular persons, or co or were a co is a sham.