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Chapter 7
Protection for the promoter
entering into an agreement of Postponing
‘novation’ (this involves finalising contracts
discharging the original until the company
contract and replacing it with is formed.
a new one).
buying an ‘off the Promoter may protect agreeing with the
shelf’ company, so it his position by: company that it
is ready to contract. will meet his
expenses
including a term giving the co. the right
to sue under the Contracts (Rights of
Third Parties) Act 1999. N.B. this does
not remove the promoter’s liability.
Off-the shelf companies
An ‘off-the-shelf’ company is one that has already been formed. Buying off the shelf
has a number of advantages and disadvantages:
Advantages Disadvantages
Cheap and simple to buy. The Articles of Association may be
unsuitable (e.g. name, share capital and
structure).
Can trade immediately. Altering the Articles will incur costs and
may be inconvenient.
No problem of pre-incorporation Need to change officers.
contracts.
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