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Preventing liability in pre-incorporation contracts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › Preventing liability in pre-incorporation contracts

  • This topic has 1 reply, 2 voices, and was last updated 3 months ago by MikeLittle.
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  • March 27, 2022 at 12:02 am #651975
    ilham9089
    • Topics: 211
    • Replies: 165
    • ☆☆☆

    Can you please explain what it means to buy an off the self company, and novating a contract means? And how exactly this prevents promoters from being liable in pre-incorporation contracts.

    March 27, 2022 at 8:44 am #651996
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22547
    • ☆☆☆☆☆

    ‘ to buy an off the self company’ There are organisations in the UK (and elsewhere too I assume) that specialise in the business of forming companies. They register them and hold them ‘in stock’ in readiness for someone who wants a company to contact them (often as a result of an advertisement)

    The advantage for the contact is that a company is already formed and ready to go so there is no waiting time between the initial request and the delivery of the company

    Effectively, you’ve gone to ‘a shop’ and bought a company ‘off the shelf’

    OK?

    How does it prevent promoter liability? The company is already formed so there’s no concept of pre-incorporation

    OK?

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