Day 88 The formation and contract of a company

The formation and contract of a company 

The company as the most preferred investment vehicle faces more formal regulations than other types of business. In Australia, the formation of a company is not very complicated. The Corporations Act (2001) s.117 outlines the lodgment of a company, which requires the filling in the application form 201 from ASIC and pays the relevant fees. Once the process is completed, the company will be granted an ACN and the certificate of registration by ASIC. Section 119 clarifies at this point, the company comes into existence as a separate legal entity (body corporate). Prior of the business registration, the company is not treated as an entity, therefore it does not have the ability to enter a contract. However, the formation progress of the company requires making various contracts with third parties. For instance, the contract of payments to office location or the purchase of furniture. To solve this problem, the company normally would authorize a promoter to be bind into pre-incorporation contracts on behalf of the company. The common law imposes fiduciary duties on the promoters in order them to act as the company’s interest. S.131 determines the certain obligations of promoters and pre-registration contracts. The company becomes bond by the contract once it is registered and ratifies the contract. If the company refuses to ratify the contract, then the liability lies on the promoters, exceptions applied. 

Speaking of entering a contract, the company may do so directly or indirectly. To bind the company directly with a contract, there must be at least two directors, a director and a secretary or the sole director involved. On the other hand, the board may also appoint an agent to act on behalf of the company. Which incur the issues of authority. In most cases, the argumentations between both parities are about does the agent has the authority to sign the contract? On the purpose of protecting the third parties, the common law allows them to make assumptions of implied actual authority apparent authority and indoor management rules. The company would be held liable if either the common law assumption or the statuary assumption is sufficient. 

The formation and contract regulations of a company are strongly supported by the Corporations Act (2001) (Cth). Hence it requires us to do more study to compensate it.