Tutorial 2: Promoters and Pre-incorporation Contracts

1.

What is the effect of a pre incorporated contract on the company.

2.

Briefly explain the Malaysian position on pre-incorporated contracts.

3.

In the event of a secret profit made by a promoter of a company, what are the

remedies available to the company?

4.

What are the roles played by a promoter before the formation of the

company?
5.

If there is a contract entered into before the formation of the company, can the

company choose not to honour the contract? Please state your answer with the
support of case law.
6.

In January 2009, Annie Apples and Betty Berry decided to form a company to

manufacture wine. In March 2009, Annie without telling Betty purchased a plot of
land, Grapefield at a properly conducted auction for a price of RM 375,000. This
was actually more than 100% less than its true market value at that time.
Grapefield was then transferred to the sole name of Annie.
In August 2009, Annie approached Dave Glee and explained to him that she was
forming a wine manufacturing company. She entered into an agreement with Dave to
supply a hydraulic grape press machine for the sum of RM 50,000 which shall be
payable within three months of delivery.

In December of 2009, Annie and Betty formed a company, Sloshed Sdn. Bhd. and
that company was duly incorporated in accordance with the Companies Act 1965.
They each held 500,000 RM1 fully paid up shares in the newly formed company.
In January of 2010, Annie sold Grapeacre for RM1.2 million (the actual market
value at that time) to Slosh Sdn. Bhd. Last week, they sold the company to Sean
Kayne who has now discovered all these facts. Sean has been receiving phone calls
from an irate Dave demanding payment.
Discuss.