Company law for accountants Essay Example | Topics and Well Written Essays - 2500 words

Company law for accountants - Essay Example Promoters are involved in the formation of a company and deal with formalities of a companys registration, finding share holders and negotiations for new company business contracts. However, companies which are not yet been incorporated cannot enforce contract because they have not attain a legal status to attain contractual rights or sustain contractual liabilities existing from a pre-incorporation agreement and therefore the pre-incorporation agreements cannot oblige a company or the other parties involved. No action could be taken against candy because of the following reasons. First, the company directors knew that candy was bankrupt pursuant to the court order dated 23rd June 2011 and therefore, he was legally prohibited from managing, forming or promoting a limited company unless he gets an explicit permission from the court. But Becky, one of the directors, knew candy’s plan (of promoting the company) but did nothing to stop or inform candy about the court order regarding his bankruptcy and the implications thereafter. It was therefore unlawful for Becky that even having known that candy was bankrupt, he went ahead and allowed him to negotiate with yuenshiu on an exclusive agreement on behave of the company (gallery company) that once formed, it would take yuenshiu’s output and sell it in return for 50% commission on the first year and with opportunity to extend for further five year and at 40%. It was illegal that candy had to use the inside knowledge of the company to profit at the expense of other investors’. Candy seems to both a share holder and a promoter of the company. Has a promoter, candy must not make secret profits out of promotion of the new company. For example she ought to have disclosed to the company that he had received a gift as a result of the transaction between her on behaves of the company and yuenshiu the investor. Candy was also