QUESTION 1 (I)
Will Simon be solely liable if things go wrong?
Provisions/ Case law:
A promoter is defined in Twycross v Grant (1877) as ‘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’. The promoter would be the person who undertakes the formation of a company by carrying out the procedures necessary for incorporation, person actually interested in the company or professionals who incorporate a company as part of their business. But under Section 4 The Companies Act 1965 states does not include any person by reason only of his acting in a professional capacity. Hence, such a person is termed as ‘an active promoter’. Besides active promoter, passive promoter is a person who is not actively involved in its formation but contributed to the initial working capital of the company would also be deemed a promoter. This can be seen in the case law of Tracy v Mandalay Pty Ltd (1953). Based on common law, Section 131(2) Corporations Act 2001 testify that ‘inflict a liability for damages only on the person who entered into a contract or acted on behalf of the company’. For example Bay v Illawarra Stationary Supplies Pty. Ltd (1986) case had four advocates one of them had entered into a contract on behalf of the company, the company was not formed at that time so the company had failed to ratify the contract, and then the Illawarra suppliers try to sue all four advocates. The court found only one of the account was liable to pay the damages because he was the only who had sign the contract.
In the case of Simon, if things go wrong he will not be solely liable for the necessary steps to form a company. Bradshaw and Rudy are the passive promoter subsequently the passive promoter will be deemed as promoter so Bradshaw and Rudy are also responsibilities. Nevertheless, if Simon alone entered into a contract on behalf the company before it has...
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