BY ZALEHA ZAIN. Pre incorporation contracts and its effects in MALAYSIA AND AT COMMON LAW. Definition of Pre-iC: Any contract or transactions which purports to be made by or on behalf of the company before its incorporation. Who’s promoter? A person who undertakes to form a company and takes the preliminary steps for its incorporation (Twycross v Grant, (1877)). What his duties & obligations? First and foremost, P has FIDUCIARY RELATIONSHIP with the company. So, what does it means? (1) It means that, a promoter must make full disclosure of all material facts when dealing with the company (Erlanger v New Sombrero Phosphate Co Ltd(1878)) (2) P has fiduciary duty (has trust). It must act honestly, for the benefit of the company. For example, if there’s a profit, a promoter must DECLARE it for that particular of situation. (Gluckstein v Barnes (1900)) Other duties: Has a legal duty to not make any secret profit out of the promotion of the company w/out company consent (Fairview Schools Bhd) Pay compensation for any person subscribes any share of company on good faith to the prospectus, for any loss suffered because of untrue statement therein (s 46 CA) Criminal liability for untrue statement in prospectus, but such presumption may be rebuttable (s 47(1)). Remedies for breach of P’s duties Rescission (rescind the contract ) Damages Disqualification as a promoter Reimbursement of promotional expenses ( no payment for P’s salary) Recovery of secret profit and constructive trust POSITION OF Pre-IC : -COMMON LAW -THE COMPANIES ACT 1965 PLEASE REFER TABLE AS IN SLIDE ABOVE. TQ