Pre-incorporation contracts: questions to resolve

A company cannot make an agreement as an existing entity before it has been incorporated. If someone signs a document in the name of a proposed company, they should not assume the future company will automatically take the obligation away from them.

Identify who is actually contracting

Section 51 of the Companies Act 2006 addresses contracts purportedly made for a company that has not yet been formed. Subject to an agreement to the contrary, personal responsibility can fall on the person acting for the proposed company. The wording and circumstances need careful review. ^[1]

Before signing, check the named party, signature block and any guarantee. Adding the words company to be formed is not a substitute for understanding the legal effect of the document.

Review commitments made during setup

Founders may order a website, rent space, pay deposits or commission design work before incorporation. List those arrangements and identify who owns the resulting rights and who owes the money.

For each item, keep the contract, invoice, payment evidence and correspondence. A company bank account opened later does not by itself transfer the earlier contract.

Plan the transition deliberately

Where a commitment should move to the new company, obtain advice on the appropriate transfer or replacement agreement and any counterparty consent. Do not assume the company can simply ratify an arrangement made before it existed in the same way as an existing principal.

A founder may need an express release if the intention is to remove personal liability. An internal agreement between founders does not necessarily bind the supplier or landlord.

An illustrative example

A founder orders bespoke software under a proposed company name. After incorporation, the company begins using it. That use does not necessarily answer who owns the copyright, who must pay outstanding fees or whether the founder remains liable. The contract and any later transfer need to address those points.

Before making the next commitment

• Confirm whether incorporation has actually completed.
• Identify the legal party named in the agreement.
• Check cancellation, deposit and personal guarantee terms.
• Decide how rights and obligations will move to the company.
• Retain written counterparty approval where needed.

Bring the documents together

Create a pre-incorporation commitment register

List every order, reservation, deposit and signed proposal made before the certificate date. For each entry, record the person who agreed it, the name used, the supplier, the amount paid and the remaining obligations. Include electronic acceptances and website orders; an agreement does not have to arrive as a formal paper contract to deserve review.

Prioritise commitments that are expensive, difficult to cancel or essential to the business. A long premises agreement, bespoke software development and a major equipment order are likely to need closer attention than an easily cancelled subscription. Provide the complete terms and correspondence to the adviser, not only the invoice showing the proposed company name.

Compare ways of structuring the commitment

Where possible, consider whether the business can wait until incorporation is accepted before signing. If timing prevents that, obtain advice on an agreement that accurately identifies the current parties and the intended next stage. A proposed company should not be described as already existing when it does not.

The appropriate arrangement may involve a fresh contract after incorporation or a properly agreed transfer involving the relevant parties. The choice depends on the rights, obligations and original terms. Avoid assuming that paying the next invoice from the company account has achieved the same legal result.

Identify the rights as well as the debt

Suppose a founder pays a designer to create the future company's branding. The review should cover ownership and permitted use of the work, delivery of source files, payment obligations and any continuing licence conditions. Moving the payment obligation alone may not give the company all the rights it needs to use or sell the brand.

Ask who must consent to the proposed change. A founder and company agreeing between themselves that the company will pay does not necessarily release the founder from the supplier's rights. Keep any counterparty agreement and express release with the original contract so the relationship can be understood later.

Separate contractual transfer from reimbursement

An accountant may record a genuine startup cost and advise on reimbursement. That accounting treatment answers a different question from who is bound by the supplier contract. Coordinate the two reviews so the records do not suggest a transfer that was never agreed.

If a dispute has already arisen, preserve the sequence of offers, acceptances, incorporation and payments. Do not replace the original agreement with a newly dated document intended to make it appear the company signed earlier. A clear chronology helps identify the correct parties and available options.

Before the next commitment, check the accepted incorporation date and use the correct legal entity in the contract. If a personal guarantee remains part of the deal, assess it separately rather than assuming the new company's existence removes all personal exposure.

Formation documents explain the new company's governance, but they do not automatically solve earlier contractual arrangements. ^[2] A focused contract review should consider both the pre-incorporation document and the proposed post-incorporation position, including any tax or accounting consequences of moving assets or reimbursing costs.

Use commercial contract review to describe the agreement, incorporation date and transfer question you need assessed.