Company Law - Buckham

Buckham was the promoter of Manchustar Sdn Bhd, promoter are before a company can be formed, there must be some persons who have the purpose to form a company and who take the essential steps to bring out that purpose into action. The case law for the promoter is Twycross v Grant  refers to “one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose”. However, the term promoter does not consist of those who act simply in professional ability acting on the instructions of a promoter for example a solicitor or an accountant. In this case, it is observable that Candy and Caramel are promoters by setting up the business and entering into pre-incorporation contract.

Whether Buckham and the remedies he can seek against the company. Section can be use by this case are Section 35 (1) under Companies Act 1965.

Definition of Section 35 (1) under Companies Act 1965 are a company may after its incorporation ratify the pre-incorporation contract. Once ratified the contract becomes valid and binding between the parties. Both the company and other party will be able to enforce it. Case law of Cosmic Insurance Corpn Ltd v Khoo Chiang Poh 1981explains in the fact where Mr. Khoo Chiang Poo was appointed as the managing director and enter into pre-incorporation contract. Upon incorporation, it was stated in AOA that Mr. Khoo Chiang Oh shall be organization director until he wants to quit. The court upheld that ratification of pre-incorporation contract did not affect or invalidate the appointment Khoo as director.

Principle can be use in this case are common law effect of pre-incorporation contract and provisional contract.

Definition of common law effect of pre-incorporation contract is the contract cannot, in theory, be made by the company or by the promoter since the company before its incorporate is since does not exist. Thus at common law, a company is not bound by a contract made before its incorporation. Such contract are unacceptable and void. Case law is Kepong Prospecting Ltd V Schmidt refer to Schmidt claimed payment as promised from a company to reward his service as an advised engineer before and after the company was registered when his service is terminates. In protection, the company claims that no consideration is given for the promise. The Court held that this was satisfactory in law to comprise legal consideration even though they were clearly past. As a result Schmidt was allowed to be paid for his services even though it was clearly past.