The Analysis Of Pre-incorporation Contracts By The Company Law

When a company is in the process of setting up business transactions with the third party, they conclude the deals by signing transactional contract. The time period between the signing of the contract and the company's successful obtaining of the commercial business licensure is referred to as the establishment stage of the company, or pre-company stage. The person initiates the pre-company stage needs to sign the contract of the establishment of the company with this third party in order to establish the company. This paper aims to address the problems including liability issues between the initiator and the third party, and the measurement of the effectiveness of the transactional contracts before the establishment of the company through in-depth comparative research. so far there's no law in China sets a clear standard regarding the liability and effectiveness of the initiator's signing of transactional contracts in behave of the company. In practical, contracts are usually taken as valid in this kind of situation. For the contracts that have already been executed, the liabilities assigned to different parties could be determined through making necessary changes in the body content of the contracts. After the initiator summaries the liability and responsibility of the pre-company, all other national and regional legislation and regulation almost do not contain any information regarding the initiator and pre-company's liability towards debts except that Taiwan area has the regulation that the initiator still has liability towards pre-company debts even after the establishment of the company. According to the law of our country, during the process of company establishment, the initiator takes full responsibility for the contracts he signs or signs in behave of the company in order to establish the company. Under this rule of liability division, it is possible that the initiator use the pre-company's title to do harm for personal profits and interests, and cause a bad effect on the company. Or, on the other hand, it is possible that after the establishment of the company, the company fully receives the benefits from the contracts, but the liability is unfairly bore by the initiator. Thus, it is very important to develop a method that better balances the powers and advantages between the initiator, the company and the third person. The major issue to research is pre-company liability division. In determining the sponsor and the company shall be jointly and severally liable person and give the final contract responsibility to recover the rights of the person in charge of final after to protect the trade interests of a third person, not only between the originator and the company is also determined by right of recourse against those responsible in the end. In addition to the introduction part, the main body of this paper consists of four parts.The first part is the introduction to the case. In this part, case is debriefed, important points are illustrated and the most arguable issues are discussed. Per this case, the company signed transactional contract with the third party in the name of the established company before obtaining the commercial business license. The company defaulted later and the third person discovered that when signing the contract, the company as a legal entity had not yet existed. Thus the third person filed a lawsuit against the company, claiming the company should take full responsibility of the default.The second part mainly focuses on the legal analysis of the debatable issues. By comparative analysis, liability issues of contracts signed by the pre-company and the contracts signed only in the name of the company are distinguished and discussed. The legal state of the initiator and the initiator's debt responsibility of the company in this scenario are determined.The third part discusses thoughts and lessons could be taken from this case regarding corporate law in China. This part analyzes the present situation of the legal system that's involved in this case. Those analysis could be tied back to the company s' s operational contract with company h in the process of the establishment of the company s, the default, and liability assigning. This paper also provides suggestions in the parts that could be improved.The fourth part is the conclusion. Due to the fact that the court's final decision was that the initiator and company s both share the liability. Although the court tried to protect the rights of the third person, there's no support in the law. In the paper, in considering the benefit balance between the third person, the initiator and the company, law could set standard that the company and the initiator share the liability towards the pre-company, and grant the right of subrogation to non-decisive people that are involved.