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PRE-INCORPORATION CONTRACTS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › PRE-INCORPORATION CONTRACTS

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 24, 2019 at 4:57 pm #550708
    draiells
    Member
    • Topics: 123
    • Replies: 141
    • ☆☆☆

    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.

    October 24, 2019 at 6:58 pm #550715
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    But 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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