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If a public company does business or borrowe before obtaining a trading certificate from the Registrar transaction is:
A
Invalid, and the third party cannot recover any loss
B Invalid, but the third party may recover any loss from the directors
C Valid, and the directors are punishable by a fine
D Valid, but the third party can sue the directors further damages
ANSWER IS GIVEN C HOW CAN A TRANSACTION BE VALID BEFORE EVEN OBTAINING TRADING CERTIFICATE COULD U PLZ EXPLAIN WHY IS THE ANSWER C AND WHY NOT B
Hi Safiya
The transaction is valid because, at the time the contract is entered into, the company DOES exist
Notwithstanding to the legal technicality of a public company requiring a trading certificate before it can commence trading, it is nevertheless a ‘living’ company. . But it can’t trade
Here’s an extract from a webpage where Section 761 is the section preventing a plc from trading before it obtains a Trading Certificate
“The transaction still valid
A contravention of section 761 does not affect the validity of a transaction entered into by your company, but if your company(a) enters into a transaction in contravention of that section, and
(b) fails to comply with its obligations in connection with the transaction within 21 days from being called on to do so, the directors of your company are jointly and severally liable to indemnify any other party to the transaction in respect of any loss or damage suffered by him by reason of your company’s failure to comply with its obligations.
Who is liable?
Your directors who are so liable are those who were directors at the time your company entered into the transactionDoes that explain it for you?
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