In terms of the new Companies Act, the position of those buying a property on behalf of a company yet to be formed is now more precarious. If the company on whose behalf they act is not subsequently incorporated or rejects the agreement drawn up by its representative, that individual will be held liable for the purchase or the contract penalties as set out in the contract document.
If the company is incorporated but fails to ratify the agreement in writing or rejects the agreement but fails to notify all involved within three months of its being incorporated it will under the new law be deemed to have accepted the contract.
The person concluding the agreement will only be discharged from liability if the company ratifies the agreement in terms of Section 21 of the Act.
The lesson to be learned, says Clarke, is that anyone planning to buy a property through a company to be formed should familiarise himself with the new Companies Act and keep strictly to it or he will be in trouble.
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
