Immediately prior to the incorporation of Products Ltd, Roberts, one of its promoters, bought property in his own name from Suppliers Ltd. He later sold the property to Products Ltd at a large profit without disclosure.
To whom is Roberts liable in relation to this secret profit?
A.Suppliers Ltd
B.Products Ltd
C.The promoters of products Ltd
D.The shareholders of Products Ltd
Dear sir, could you please explain to me the reason as to why the correct answer given is B?
The company doesn't even exist at the time the promoter made the contract. Just as in the case if the promoter had to pay suppliers, Products Ltd wouldnt have been responsible yeah so in case of secret profit how can Products Co claim it? when they didn't even exist legally back then.
Ask the Tutor ACCA LW
PRE-INCORPORATION CONTRACTS
6y agoBut the company Products DID exist when Roberts sold the property to Products
It's not against the law for promotors to make profits from their work but any profits made MUST be disclosed to the company and, particularly, to the first independent board of directors
OK?
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