PRE-INCORPORATION

CONTRACTS
AND
CORPORATE
GOVERNANCE
MADE BY:Dasmeet, Manleen, Alisha, Tarunjot, Mansimran.
TABLE OF CONTENT
1 INTRODUCTION
Definition and importance of pre-incorporation of contract, Memorandum of association and Article of association.

2 PRE-INCORPORATION OF CONTRACT
Definition and purpose, Key elements of a pre-incorporation contract, Examples of common pre-incorporation contracts,Risks and
considerations with pre-incorporation contracts.

3 MEMORANDUM OF ASSOCIATION
Definition and purpose, Contents of the MOA, Legal significance and amendment of the MOA, Importance of MOA in company
incorporation and operations.

4 ARTICLE OF ASSOCIATION
Definition and purpose, Contents of the AOA, Relationship between the AOA and MOA, Importance of AOA in company governance
and management.

5 CONCLUSION
Importance of understanding and complying with pre-incorporation contracts, MOA, and AOA.
INTRODUCTION
 DEFINITION OF PRE-INCORPORATION
CONTRACTS AND COMPANY FORMATION
DOCUMENTS

⚬Pre-incorporation contracts are agreements entered into by individuals or promoters on behalf of a proposed company before its formal
incorporation. These contracts are made with the intention that they will be binding on the company once it is formed. Pre-incorporation
contracts allow the promoters to make arrangements, secure assets, or establish business relationships in preparation for the company's
formation.

⚬Company formation documents refer to the legal documents that are required to be prepared and filed with the relevant government authorities during the process of
incorporating a company. The two primary company formation documents are the Memorandum of Association (MOA) and the Articles of Association (AOA).
⚬Memorandum of Association (MOA): The Memorandum of Association is a legal document that sets out the company's constitution and defines its relationship with the
outside world. It contains essential information such as the company's name, registered office address, objectives, authorized share capital, and details of the initial
shareholders.
⚬Articles of Association (AOA): The Articles of Association, also known as the Bylaws, are the internal regulations that govern the day-to-day operations and management
of the company. They provide specific rules and procedures for various aspects of the company's affairs, including shareholders' rights and responsibilities, directors'
powers and duties, issuance and transfer of shares, and conduct of meetings.
 IMPORTANCE OF PRE-INCORPORATION
CONTRACTS, MEMORANDUM OF
ASSOCIATION, AND ARTICLES OF
ASSOCIATION

PRE-INCORPORATION MOA AOA

a. Preparation and Planning: Pre-incorporation

a. Legal Existence: The MOA is a fundamental
contracts allow promoters to make
document required for company registration. a. Internal Governance: The AOA sets out rules and
necessary arrangements and secure assets
It defines the company's legal identity, regulations for the company's internal management
before the company is formally
including its name, registered office, and operations. It defines the powers and duties of
incorporated. This enables a smoother
objectives, and authorized share capital. directors, outlines procedures for meetings and
transition and operational readiness once
b. External Communication: The MOA serves as a decision-making, and establishes shareholders' rights
the company comes into existence.
public document accessible to stakeholders, and obligations.
b. Binding Obligations: These contracts
including potential investors, creditors, and b. Shareholder Protection: The AOA safeguards the
establish legal rights and obligations,
regulatory authorities. It provides essential rights and interests of shareholders by providing
ensuring that the parties involved are bound
information about the company's scope, clarity on matters such as share transfers, dividend
by the agreed terms even after the company
purpose, and structure, facilitating distribution, and protection against unfair treatment.
is incorporated.
transparency and credibility. c. Compliance and Consistency: The AOA ensures that the
c. Risk Management: Pre-incorporation
c. Limited Liability: The MOA outlines the company's operations are conducted in accordance
contracts help mitigate risks by securing key
extent of liability of the company's members. with legal requirements and regulations. It helps
assets, finalizing important agreements, and
By clearly defining the limited liability of maintain consistency in decision-making processes,
establishing relationships early on. They
shareholders, it helps protect their personal promotes accountability, and assists in avoiding
provide clarity on liabilities, terms, and
assets and ensures a predictable legal conflicts of interest.
conditions, reducing potential disputes and
framework for business transactions.
legal complications.
PRE-INCORPORATION OF
A CONTRACT
 DEFINITION AND PURPOSE
⚬Pre-incorporation contracts are agreements that are entered into by individuals or promoters on behalf of a proposed company before its formal
incorporation. These contracts are made with the intention that they will become binding on the company once it is formed. The purpose of pre-
incorporation contracts is to allow promoters to make necessary arrangements, secure assets, or establish business relationships in preparation for
the company's formation

⚬The purpose of pre-incorporation contracts can vary depending on the specific circumstances, but they generally serve several
important functions:
⚬Arrangements and Preparations: Pre-incorporation contracts allow promoters to make necessary arrangements and preparations for
the company's operations before its formal incorporation. This may include securing premises, entering into lease agreements,
purchasing assets, or hiring employees.
⚬Business Relationships: Promoters may enter into contracts with suppliers, vendors, or service providers in order to establish
business relationships that will be beneficial for the company once it is formed. These contracts can help ensure a smooth transition
and enable the company to commence operations promptly.
⚬Legal Certainty: By entering into pre-incorporation contracts, the promoters and the future company establish a legally binding
framework that provides certainty and clarity regarding their rights, obligations, and expectations. This can help prevent disputes and
uncertainties that may arise during the transition period.
 KEY ELEMENTS OF PRE-
INCORPORATION OF CONTRACT
⚬Parties Involved: A pre-incorporation contract typically involves two main parties: the
individuals or promoters who are acting on behalf of the future company and the other
party with whom they are entering into the contract. The individuals acting on behalf of the
future company are generally referred to as promoters or subscribers. These promoters will
eventually become the initial shareholders or directors of the company upon its
incorporation.
⚬Subject Matter and Terms: The subject matter of a pre-incorporation contract refers to the
specific rights, obligations, or actions that the contract covers. This can vary depending on
the nature of the contract and the needs of the future company. Common subject matters
of pre-incorporation contracts include lease agreements for office space, supplier contracts
for goods or services, employment agreements, or intellectual property licenses.
⚬Legal Status and Enforceability: The legal status and enforceability of pre-incorporation
contracts depend on the jurisdiction and applicable laws. Generally, these contracts are
enforceable against the future company once it is incorporated. The company assumes the
rights and obligations under the pre-incorporation contracts, and the promoters become
agents acting on behalf of the company.
 EXAMPLE OF COMMON PRE-
INCORPORATION CONTRACT

1. Lease Agreements: A pre-incorporation lease agreement is a contract entered into by promoters or individuals on behalf
of a future company to secure office space or other premises necessary for the company's operations. This agreement
outlines the terms and conditions of the lease, such as rent, duration, maintenance responsibilities, and any other
relevant provisions. It ensures that the company has a physical location ready for use upon its incorporation, allowing
for a smooth transition into the operational phase.

2. Supplier Contracts: Pre-incorporation supplier contracts are agreements made with vendors or suppliers on behalf of
the future company to establish business relationships and secure necessary goods or services. These contracts outline
the terms of the supply, including pricing, quantity, quality standards, delivery schedules, and payment terms. By
entering into supplier contracts, the promoters ensure that the company has a reliable supply chain in place when it
begins its operations, enabling a seamless flow of goods or services.

3. Employment Agreements: Pre-incorporation employment agreements are contracts made with individuals who will
become employees of the future company. These agreements define the terms and conditions of employment,
including job responsibilities, compensation, benefits, non-disclosure agreements, and other relevant provisions. By
securing employment agreements before incorporation, the promoters can ensure that key employees are committed
to joining the company once it is formed, contributing to a smooth transition and continuity of operations.
 RISK AND CONSIDERATION WITH PRE-
INCORPORATION CONTRACT
⚬Liability of the Parties: One of the key risks associated with pre-incorporation contracts is the potential liability of the parties
involved. Until the company is formally incorporated and assumes the rights and obligations of the contracts, the
individuals or promoters who entered into the contracts may be personally liable for fulfilling the contractual obligations.
This means that if the company fails to be incorporated or fails to ratify the contracts, the promoters may be held
personally responsible for the contractual obligations. It's crucial for the parties involved to understand and assess the
potential risks and liabilities before entering into pre-incorporation contracts.
⚬Ratification by the Company after Incorporation: Pre-incorporation contracts generally require formal ratification by the
company after its incorporation. This ratification process solidifies the company's agreement to be bound by the terms of
the contracts. However, there is a risk that the company may choose not to ratify the contracts, which could lead to non-
enforceability or termination of the contracts. Therefore, it's important for the parties involved to ensure that proper steps
are taken to facilitate the company's ratification of the contracts to minimize this risk.
⚬Limitations and Restrictions: Pre-incorporation contracts are subject to certain limitations and restrictions that need to be
considered. These limitations may include:
a. Ultra Vires Doctrine: If a pre-incorporation contract exceeds the powers or scope defined in the future company's
memorandum of association, it may be considered ultra vires (beyond the legal authority) and unenforceable.
b. Third-Party Notice: It's important for third parties entering into contracts with promoters to be aware that they are dealing
with individuals acting on behalf of a future company. Proper disclosure and understanding of the company's status as a
future entity are crucial for enforceability.
c. Legal Compliance: Pre-incorporation contracts must comply with applicable laws and regulations. Failure to comply with
legal requirements may render the contracts unenforceable or lead to legal complications.
MEMORANDUM OF
ASSOCIATION
 DEFINITION AND PURPOSE
The Memorandum of Association (MOA) is a legal document that defines the fundamental
characteristics and scope of a company. It is one of the essential documents required for the
incorporation of a company. The MOA outlines the company's relationship with the outside world
and provides crucial information about its structure, objectives, and powers.

The purpose of the MOA is to establish the legal existence and identity of the company. It serves
as a public document accessible to stakeholders, including potential investors, creditors, and
regulatory authorities. The MOA helps define the company's purpose, powers, and limitations,
providing clarity and transparency in its operations.
 CONTENTS OF MEMORANDUM OF
ASSOCIATION
⚬Name and Registered Office of the Company: The MOA begins with the name of the company, which should be unique and comply with the
regulations of the jurisdiction where the company is being incorporated. It also specifies the registered office address, which determines
the company's legal jurisdiction and serves as its official address for communication.
⚬Objectives and Business Activities: The MOA outlines the main objectives and business activities that the company is authorized to
undertake. It defines the scope and nature of the company's operations, providing clarity on the purpose for which the company is
formed. The objectives stated in the MOA help guide the company's activities and provide a framework for decision-making.
⚬Liability of Members: This section of the MOA specifies the liability of the company's members, distinguishing between different types of
companies. For companies limited by shares, the liability of the shareholders is limited to the amount unpaid on their shares. For
companies limited by guarantee, the liability of members is limited to the amount they undertake to contribute to the assets of the
company in the event of its winding up.
⚬Authorized Share Capital and Division: The MOA states the authorized share capital of the company, which represents the maximum value
of shares that the company can issue. It specifies the different classes of shares, if any, and their respective rights, privileges, and
restrictions. The authorized share capital sets the limit for the company to raise funds through the issuance of shares.
⚬Association Clauses: The association clauses in the MOA confirm the subscribers' intention to form a company and their agreement to
become members of the company upon incorporation. These clauses include statements expressing the subscribers' consent to
become shareholders or members of the company and their acceptance of the MOA and the future Articles of Association (AOA) of the
company. The association clauses also establish the subscribers' initial shareholding or membership details.
 LEGAL SIGNIFICANCE AND
AMENDMENTS OF MOA
The Memorandum of Association (MOA) holds significant legal significance for a company. It serves as a constitutional document
that establishes the company's existence, purpose, powers, and limitations. The key legal significance of the MOA includes:
⚬Doctrine of Constructive Notice: The MOA is a public document that is accessible to stakeholders, including potential investors,
creditors, and regulatory authorities. It operates under the doctrine of constructive notice, meaning that any person dealing
with the company is presumed to have knowledge of the company's contents as stated in the MOA. This ensures
transparency and protects the interests of third parties by providing them with important information about the company.
⚬Ultra Vires Doctrine: The MOA defines the scope of the company's activities and acts as a boundary for its actions. The ultra
vires doctrine states that any action taken by the company beyond the scope of its objects, as defined in the MOA, is
considered void and unenforceable. This protects the company and its stakeholders from unauthorized or excessive actions
by the company.
⚬Binding Force on the Company: The MOA binds the company and its members, creating a legal relationship and obligations. It
serves as a contract between the company and its members, outlining their rights, duties, and liabilities. The company must
operate within the framework established by the MOA, and its members are bound by its provisions.
The MOA can be amended, but the process generally requires compliance with legal procedures and, in
many jurisdictions, approval by the company's shareholders. The amendment process varies depending
on the laws of the jurisdiction where the company is incorporated, but it typically involves the following
steps:
⚬Board Resolution: The proposed amendment is initiated by a board resolution passed by the
company's directors. The resolution should outline the proposed changes to the MOA.
⚬Shareholder Approval: In most cases, the proposed amendment must be approved by the
company's shareholders. This approval is typically obtained through a special resolution passed
during a general meeting or through a written resolution signed by the shareholders.
⚬Filing and Registration: Once the amendment is approved by the shareholders, it needs to be filed
with the appropriate regulatory authority or the company registrar. This filing ensures that the
amended MOA is legally recognized and updated in the company's records.
⚬Updated MOA: After the filing and registration process, the MOA is updated with the approved
amendments, reflecting the changes made to the original document. The amended MOA becomes
the governing document for the company, superseding the provisions of the original MOA.
.
 IMPORTANCE OF MOA IN COMPANY
INCORPORATION AND OPERATION

⚬Legal Requirement for Incorporation: The MOA is a mandatory document required for the incorporation of a company in most
jurisdictions. It is one of the foundational documents submitted to the regulatory authorities during the registration process.
⚬Defines Company's Objects and Scope: The MOA clearly outlines the company's objectives, business activities, and scope of
operations. It specifies the authorized activities that the company can engage in. This provides clarity and guidance to the
company's management, shareholders, and stakeholders, ensuring that the company operates within the defined boundaries.
⚬Protects the Interests of Shareholders and Stakeholders: The MOA safeguards the interests of shareholders and stakeholders by defining
their rights, powers, and obligations. It establishes the rules and regulations governing the relationship between the company
and its members
⚬Doctrine of Constructive Notice: The MOA is a public document accessible to third parties. It operates under the doctrine of
constructive notice, meaning that any person dealing with the company is presumed to have knowledge of the contents of the
MOA.
⚬Ultra Vires Protection: The MOA helps protect the company from engaging in activities beyond its authorized objects. Actions taken
by the company that are ultra vires (beyond the legal authority) as per the MOA are considered void and unenforceable.
⚬Basis for Corporate Governance: The MOA forms the basis for the company's corporate governance structure. It sets out the rules
for appointing directors, conducting board meetings, and other governance-related matters.
⚬Reference for Regulatory Compliance: The MOA serves as a reference document for regulatory compliance. It helps the company
understand its legal obligations, reporting requirements, and compliance with relevant laws and regulations.
 ARTICLE OF
ASSOCIATION
DEFINITION AND PURPOSE
The Articles of Association (AOA) are a legal document that sets out the internal rules,
regulations, and operational procedures of a company. It works in conjunction with the
Memorandum of Association (MOA) to govern the internal affairs and management of the
company. While the MOA outlines the company's external relationship with the outside
world, the AOA focuses on the internal workings of the company.

The purpose of the AOA is to provide a framework for the company's internal governance,
management structure, and the rights and responsibilities of its members. It specifies how the
company will be run, how decisions will be made, and the rights and duties of the
shareholders and directors.
 CONTENTS OF AOA
⚬Share Capital and Shares: The AOA outlines the details of the company's share capital, including the authorized share capital,
the number and classes of shares, and their nominal or par value. It may also include provisions regarding the issuance,
allotment, transfer, and transmission of shares. The AOA specifies the rights, privileges, and restrictions attached to
different classes of shares, such as voting rights, dividend entitlements, and preferential treatment.
⚬Shareholders' Rights and Obligations: The AOA sets out the rights, obligations, and responsibilities of the company's
shareholders. It covers aspects such as voting rights, participation in general meetings, procedures for appointing and
removing directors, pre-emptive rights, and restrictions on share transfers. The AOA may also address matters related to
the shareholders' liability, contributions, and indemnification.
⚬Directors' Powers and Duties: The AOA delineates the powers, duties, and responsibilities of the company's directors. It
specifies the authority granted to directors to manage the company's affairs, make decisions, enter into contracts, and
represent the company. The AOA may outline the procedures for appointing, removing, and remunerating directors, as
well as any limitations or restrictions on their powers.
⚬Procedures for Meetings and Resolutions: The AOA provides guidance on the procedures for holding general meetings of the
company, including annual general meetings and extraordinary general meetings. It outlines the notice period, quorum
requirements, voting procedures, and different types of resolutions required for specific matters.
⚬Dividends, Accounts, and Audits: The AOA may include provisions related to the distribution of dividends, including the
determination of dividend amounts, timing of payments, and the rights of shareholders in relation to dividends. It may
also cover matters related to the company's accounts, financial reporting, and audit requirements.
RELATIONSHIP BETWEEN MOA & AOA
 IMPORTANCE OF AOA IN COMPANY
GOVERNANCE & MANAGEMENT

⚬Internal Governance Framework: The AOA establishes the internal governance framework of the company. It outlines the roles, powers,
and responsibilities of directors, shareholders, and other key stakeholders. By defining the structure and authority within the
company, the AOA ensures effective decision-making and accountability.
⚬Clarity in Decision-Making: The AOA provides clarity and guidance on decision-making processes within the company. It specifies the
procedures for board meetings, general meetings, and passing resolutions. This clarity ensures that decisions are made in a consistent
and transparent manner, reducing the risk of disputes or conflicts.
⚬Protection of Shareholders' Rights: The AOA safeguards the rights and interests of shareholders. It outlines their voting rights, dividend
entitlements, share transfer procedures, and other rights related to company ownership. By clearly defining these rights, the AOA
ensures that shareholders are treated fairly and have a say in important matters affecting the company.
⚬Directors' Duties and Accountability: The AOA sets out the duties and responsibilities of directors. It defines their powers, the procedures
for their appointment and removal, and their fiduciary obligations towards the company and its shareholders. This promotes
transparency, accountability, and responsible decision-making by the directors.
⚬Management Structure and Succession Planning: The AOA establishes the management structure of the company, including the roles and
responsibilities of various officers. It provides guidelines for the appointment, removal, and remuneration of directors and key
executives
⚬Shareholder Protection and Investor Confidence: A well-drafted AOA instills confidence in shareholders and investors. It provides clarity on
the company's internal governance mechanisms, protection of rights, and procedures for resolving disputes.
⚬Compliance and Legal Obligations: The AOA helps the company comply with legal and regulatory requirements. It ensures that the
company operates within the framework of applicable laws and regulations, promoting good corporate governance practices.
Compliance with the AOA helps the company avoid legal risks, penalties, and potential disputes.
CONCLUSION
Understanding and complying with pre-incorporation contracts, Memorandum of Association (MOA), and Articles of
Association (AOA) are of utmost importance for a company in summarized form:
⚬Pre-incorporation Contracts:
￭ Importance: Pre-incorporation contracts establish legal obligations before the company is
officially formed.
￭ Compliance: Complying with these contracts ensures fulfillment of pre-existing commitments and
avoids potential disputes or legal consequences.
⚬Memorandum of Association (MOA):
￭ Importance: MOA defines the company's objectives, authorized activities, and its external
relationship.
￭ Compliance: Understanding and complying with the MOA ensures the company operates within
its authorized scope, protects stakeholders' interests, and maintains legal compliance.
⚬Articles of Association (AOA):
￭ Importance: AOA governs the company's internal affairs, management structure, and rights and
obligations of shareholders and directors.
￭ Compliance: Complying with the AOA ensures proper corporate governance, protects
shareholders' rights, facilitates decision-making, and ensures adherence to legal requirements.
THANK YOU