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Corporate Law #3, 1/11

For Whose Conduct is a Corporation Responsible?


A company’s capacity to contract
A company has the legal capacity and powers of an individual: s 124(1).
A company also has all the powers that only a body corporate can exercise including, for
example, the powers referred to in s 124(1).
The powers in s 124(1) include, for example, the power to issue shares and debentures;
and grant a floating charge. An individual cannot do any of these peculiarly corporate
things.

The Relevance of a Company’s Constitution to Its Legal Capacity


If a company has a constitution, it may:
set out the company’s objects: s 125(2); or
contain an express restriction on, or prohibition of, the company’s exercise of any of its
powers: s 125(1).
However, an act of a company is not invalid merely because it is contrary to or beyond
any objects, restrictions or prohibitions in its constitution: ss 125(1)-(2).

The only companies that are required to have a constitution are:


listed companies which are required by the ASX Listing Rules to have a constitution;
no liability companies because s 112(2)(b) requires a no liability company to have a
constitution which states that its sole objects are mining purposes; and
companies limited by guarantee which wish to be relieved from the obligation to have
the word ‘Limited’ in their name: see s 150(1).
Almost all companies have their own constitution even though they are not required to
have a constitution.

The ‘indoor management’ rule


This rule is derived from the decision in Royal British Bank v Turquand (1856) 6 El &
Bl 327; 119 ER 886.
In general, it permits a person, who is acting in good faith, to assume that any internal
delegations of power or approvals, that are necessary under a company’s constitution
for an organ or agent of the company to validly exercise a power and bind the
company, have occurred.

What if the Person Dealing With a Company Is Aware of the Content of Its
Constitution?
The company will not be bound by any act of a person (agent), who is purporting to
represent it, if its constitution makes it clear that the person (agent) could not have
the necessary authority to bind the company.
That person dealing with the company still has the benefit of the indoor management
rule.

Is It Wise For Outsiders To Examine A Company’s Constitution Before Dealing


With It?
If an outsider examines the constitution they will have actual knowledge of any:
restrictions on the company’s capacity; and
restrictions or limitations on the exercise of the company’s powers by its organs and
agents.
An outsider’s knowledge will be relevant to the outsider’s ability to rely on any
representations of authority made by the company. San outsider’s knowledge may
also be relevant to an outsider’s ability to make one or more of the s 129 statutory
assumptions: see s 128(4).
Corporate Law #3, 2/11

Therefore, the company will not be liable to outsider on a transaction, purportedly


negotiated on its behalf, if the outsider knew or should have known, from the content
of the company’s constitution, that the ‘company negotiator’ could not have had the
company’s authority to bind it to the transaction because, for example, it was
inconsistent with the company’s stated objects and powers.

The constitution might also indicate that although the company had the capacity to
enter into the contract it could not do so through the particular company negotiator or
agent.
What If the outsider Has No Actual Knowledge of the Company’s Constitution?
The outsider will be unaffected by any restrictions or limitations on the company’s
capacity or power contained in the constitution: CA s 130(1).
The outsider will be entitled to assume that the company has the full capacity and range
of powers conferred by s 124(1).
The company will be bound to the outsider on any transaction negotiated on its behalf
by persons with actual or apparent authority to bind it to the transaction.
An outsider may also have the ability to make one or more of the s 129 statutory
assumptions in any litigation against the company.

Actual authority
A company’s power to make, vary, ratify or discharge a contract may be exercised by an
individual acting with the company’s express or implied authority and on behalf of the
company: s 126(1).
A person has ‘actual authority’ to act for a company if the person has been given that
authority by, or pursuant to, its constitution or any applicable replaceable rules.

Who Has Actual Authority To Bind A Company?


Board of Directors: Organ with general management powers and all other powers of the
company except those vested in general meeting: see replaceable rule s 198A.
General Meeting: Organ with the powers given by the Corporations Act and the
company’s constitution.
1. If either of these organs does an act within their respective powers, the act is
considered to be an act of the company itself. See, for example, FCT v. Lutovi
Investments Pty Ltd (1978) 37 FLR 209 [reversed on other grounds on appeal (1979)
53 ALJR 152] Deane J.

Delegated Powers
Corporate Law #3, 3/11

Board of
Power to delegate
Directors
Power to appoint MD: powers of board
see, for example, CA to MD: see, for
replaceable rules s201J example,
replaceable rules
Managing s198C(1)
Director

Implied power for MD


to sub-delegate to
other company officers
and agents

Company constitutions routinely deal with delegations of board powers to the managing
director and to a committee of directors or an individual director.
Replaceable rule s 198D(1) also empowers the directors to delegate their powers to
employees or other persons. There is no doubt that managing directors are entitled to
sub-delegate their powers to other company executive directors and employees.
However, company constitutions rarely deal with these powers to delegate. When you
deal with a sales assistant in a large department store, you might consider why the
assistant probably has the actual authority of the company that owns the store to deal
with you.

Apparent Authority
A person will have apparent authority to bind a company if the company has held the
person out as having the relevant authority.
1. ‘Apparent authority’ and ‘ostensible authority’ are interchangeable terms. This type
of authority is rooted in equity. The company is estopped by its behaviour from
denying, as against persons acting in good faith, that someone has authority to act
for it and bind it to a transaction.

How Does a Company Represent That a Person Has Its Authority?


By authorised organs or agents appointing the person to a particular position.
By the relevant organ or authorised agent allowing a person to act as though the person
has been appointed by the organ or agent to a particular position.
By the relevant organ or authorised agent otherwise representing by words or conduct
that the person has the necessary authority.
The relevant organ or agent is the organ or agent that, under the company’s
constitution, is entitled to exercise the company’s power to make the appointment.

Usual Authority
When a company appoints a person to a particular position, or otherwise represents that
the person holds that position, the company is taken to hold the person out as having
all of the usual authority that persons occupying that position, in companies carrying
on a similar kind of business, would ordinarily have.
Corporate Law #3, 4/11

However, the High Court, in the 1975 held that, in order for a company to be estopped
from denying that a person had its apparent authority to bind it, the representation,
which is alleged to have given rise to the estoppel, must have been made by someone
with actual authority to make it.
Is it likely that a company officer would have actual authority to misrepresent the
authority of another company officer? Crabtree is featured at para 5.335 of Redmond

See Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing
Co Pty Ltd (1975) 133 CLR 72.
In Crabtree, the managing director Bruce intimated to a person that Bruce’s brother
Peter had the carriage of a particular contract negotiation.
Peter signed a contract on the company’s behalf to purchase an expensive item of
equipment.
The company was held to be not liable because Bruce had no actual authority to
represent that Peter had authority to bind the company to the purchase.
As managing director, Bruce had apparent, but not actual, authority to purchase the
equipment himself.
Bruce lacked actual authority because the company’s directors had privately agreed
that the purchase decision should be made at board level or by Bruce, Peter and their
father collectively.
Peter lacked actual authority for the same reason.
Peter also lacked apparent authority because the usual authority of a person of his
status (technical officer) in that kind of company would not extend to acquiring such
expensive equipment.

But:
More recent amendments to the legislation make it possible that Crabtree-Vickers would
be decided differently today.
Arguably, Bruce, as managing director, should be considered as having apparent
authority to indicate who, within the company, could negotiate a transaction on the
company’s behalf.
The apparent authority of Bruce to make such a representation should not be eroded by
circumstances of which the person who dealt with Peter, in reliance on the conduct of
Bruce, could not reasonably have been aware.
Note:
1. 1984 Amendments: See now CA s 128(1) and ss 129(2)-(3).
2. It is also arguable that the High Court misapplied Freeman & Lockyer in reaching
its decision. It is arguable that, notwithstanding the secret limitation on Bruce’s
authority, he still had the power to manage the company’s business generally.
3. Lipton & Herzberg p 119: ‘It is anomalous that a company is bound by a
contract entered into by a de facto managing director but not bound by
representations of the de facto managing director that someone else has
apparent authority.’ [On the facts of Crabtree, the real managing director Bruce
has arguably represented to the outsider that Peter was the person to deal with;
that is that Peter had actual authority to bind the company.]
4. Boros & Duns p 144: ‘What causes disquiet about [Crabtree-Vickers} is that the
company would have been liable if Bruce Jnr had authorised Peter to place the
order. If he had authorised Peter to place the order this would have been an
exercise of his apparent authority just as if he placed the order himself. However,
it was because he did not have the actual authority required to make a binding
representation on behalf of the company that the company was not liable. The
disquiet arises because the third party is a stranger to these internal corporate
Corporate Law #3, 5/11

arrangements. It is true that that Peter had no actual or apparent authority (as a
mere technical officer) to make a purchase of this magnitude and that they could
have checked to see if Bruce Jnr had actually authorised Peter to submit the order
form. However, that the outcome could turn on the arrangements made between
Bruce Jnr and Peter seems somewhat arbitrary and the onus it places on the third
party to make enquiries seems out of step with the protection otherwise offered
by apparent authority. It will be seen below that had the provisions of the Act
been in place the result may well have been different.’
5. The effect of the reasoning in Crabtree-Vickers is that the company would only
have been bound by a representation made by Bruce Jnr that Peter was
authorised to bind the company if the board had actually authorised Bruce Jnr to
make that representation. However, in that event, both Bruce Jnr and Peter would
have been acting with the company’s actual authority. Thus the High Court’s
reasoning gives the concept of apparent authority very little work to do. How
often does a board of directors give a managing director actual authority to
misrepresent the authority of another?
6. Also note that the approach taken to apparent authority in Crabtree-Vickers
seems to be inconsistent with the following statement by Brennan J in Northside
Developments Pty Ltd v Registrar-General (NSW) [1990] HCA 32 at [13]: ‘In
transactions other than those engaged in for the purposes of a company's
business or otherwise for the benefit of the company, and in transactions where
the officer or agent has purported to exercise an authority over and beyond the
authority which an officer or agent in that position would ordinarily be expected to
possess, a party seeking to bind the company by estoppel must rely on particular
representations of authority made by the company - that is, by officers or agents
of the company having actual or ostensible authority to make those
representations.’ (emphasis added)

Note that the High Court indicated that the company would have been liable if:
Bruce had ordered the equipment; or
Bruce had actually instructed Peter to order the equipment.

In both cases, Bruce, as managing director, would have had the apparent authority to
order the equipment either personally or through an authorised agent such as Peter:
see para 16 of the judgment.

Company Seals
Every company used to have to have a company seal [‘common seal’].
Now a seal is optional: s 123(1).
Even if a company has a seal, it is not necessary that it be applied (affixed) to
documents for the documents to be considered to be executed by the company.
Where a company does have a seal it must comply with s 123. Some companies have
quite elaborate metal seals. However, most modern seals are made from plastic.

Execution of documents under seal


A company may execute a document without using a common seal if the document is
signed by:
2 directors of the company; or
a director and a company secretary of the company; or
for a pty co that has a sole director who is also the sole company secretary – that
director: s 127(1).
Note that a pty co does not have to have a company secretary: see s 204A(1).
Corporate Law #3, 6/11

How does a pty co which has only one director but no secretary execute a document
without using a common seal? See CA s 198E.
Note also that s 127(1) is not intended to state the only way in which a company can
execute a document without using a common seal. The company’s constitution may, for
example, set out alternative or extra ways: see s 127(4).
Again consider the position of a pty co that has a sole director but no secretary.
Presumably, the seal would have to be used in the manner set out in the company’s
constitution. But what if the constitution is silent? Is CA s 198E relevant?

The s 129 Statutory Assumptions


A person is entitled to make one or more of the s 129 assumptions when dealing with a
company unless the person knows or suspects that the relevant assumption is
incorrect: s 128(1), s 128(4).
An assumption may be made even if an officer or agent of the company acts
fraudulently, or forges a document, in connection with the dealings: s 128(3).
The statutory assumptions were intended to codify and ‘broaden’ the common law
indoor management rule.

Effect of entitlement to make a s 129 assumption


Where a person is entitled to make a s 129 assumption in dealings with a company, the
company is not entitled to assert in legal proceedings that the assumption is
incorrect: ss 128(1)-(2).
The ability to make a s 129 assumption may assist, in an evidentiary sense, the person
to successfully sue the company.
However, whether the company is liable will still be determined by reference to common
law principles (eg corporate agency principles) and to provisions such as s 126 and s
127.

Sections 128 and 129


An attempt has been made to legislate something equivalent to, but not identical with,
the common law ‘indoor management rule.

Section 128(1)
1. A person is entitled to make the assumptions in s 129 in relation to dealings with a
company.
2. The company is not entitled to assert in proceedings in relation to the dealings that
any of the assumptions are incorrect.
3. The ability of a person to make the s 129 assumptions may make it difficult for a
company to defend an action against it.
4. Sections 128-129 do not purport to impose substantive liability on companies.

‘Dealings With a Company’


• There must be dealings (in the sense of negotiations or other steps in relation to a
contemplated transaction) with someone on behalf of the company which are
dealings authorised by the company.
• It is not necessary that the person representing the company have authority from
the company to commit the company to the relevant transactions or execute the
relevant documents: Soyfer v Earlmaze P/L [2000] NSWSC 1068 at [82].
Hodgson CJ added: ‘It is necessary that the person have authority to undertake some
negotiation or other steps, so that the dealings, in relation to which the document is
executed, are properly considered to be dealings with the company…’
Corporate Law #3, 7/11

Section 128(3)
• The assumptions may be made even if an officer or agent of the company acts
fraudulently, or forges a document, in connection with the dealings.
• In Soyfer at [80], Hodgson CJ considered that:
1. The relevant fraud or forgery does not need to be within the agent’s authority in such
a way as would make the company liable for it.
2. It is sufficient that the person responsible for the fraud or forgery is an agent of the
company in the sense of having some legitimate role on behalf of the company in
relation to the dealings in question.

When the s 129 assumptions cannot be made: s 128(4)


1. A person is not entitled to make an assumption in s 129 if, at the time of the
dealings, they knew or suspected that the assumption was incorrect.
2. The onus of proof in relation to s 128(4) lies on whoever is challenging a person’s
entitlement to make a s 129 assumption.
3. It must be shown that the person in question actually knew or actually suspected
that the assumption in question was incorrect.
4. It is not sufficient to show that the circumstances were such as to put a reasonable
person upon enquiry.
5. The common law ‘put upon enquiry’ test has been displaced by s 128(4).
Hodgson C J also added in Soyfer that a person who has been wilfully ‘blind’ to the facts
would probably have an actual suspicion in relation to them.
The same view of s 128(4) was taken by Gray J in Sunburst Properties Pty Ltd (in
liq) v Agwater Pty Ltd [2005] SASC 335 at [178]

Section 129(1)
A person may assume that the company’s constitution (if any), and any applicable
replaceable rules, have been complied with.
Note:
Consistent with the indoor management rule, and subject to s 128(4), s 129(1) allows an
outsider to assume, for example, that:
appointments, which might be made under the constitution or rules, have been made;
delegations of power, that might be made under the constitution or rules, have been
made;
any required general meeting or board of directors approval for a transaction has been
given.

Section 129(2)
A person may assume that anyone who appears, from information provided by the
company that is available to the public from ASIC, to be a director or a company
secretary of the company:
(a) has been duly appointed; and
(b) has authority to exercise the powers and perform the duties customarily exercised or
performed by a director or company secretary of a similar kind of company.
Note:
1. A similar company is presumably one that carries on a similar kind of business. The
immediate predecessor of s 129(1) was s 164(3)(b). It referred to ‘a company carrying
on a business of the kind carried on by the company’. The information would have to be
publicly available from ASIC at the time of the relevant dealing.
2. The information provided to ASIC is likely to be that in the company’s annual return
(see s 345 and s 348) or in the notice required by s 205B (notice of personal details of
each director and secretary and notice of changes to those details). Information
Corporate Law #3, 8/11

provided to ASIC by company directors or secretaries under s 205A (notice of retirement


or resignation) and s 205E (in response to ASIC questions) would be outside the terms of
s 129(1) as it would not have been provided by the company.

• The usual authority of directors and company secretaries will be dealt with in next
week’s seminar.
• Should a person be able to make the s 129(2) assumption if the person was
unaware of the information provided by the company to ASIC when dealing with
the company?

Section 129(3)
A person may assume that anyone who is held out by the company to be an officer or
agent of the company:
(a) has been duly appointed; and
(b) has authority to exercise the powers and perform the duties customarily exercised or
performed by that kind of officer or agent of a similar company.
Arguably, in Crabtree-Vickers, the board of Australian Direct Mail Advertising Co Ltd had
held out Bruce Jnr as having the power to represent to the Crabtree-Vickers agent that
Peter was the person to deal with. The board’s appointment of Bruce Jnr would be taken
to involve a representation by the board (acting as the company) that Bruce Jnr had all
of the usual powers and authority of a managing director of a printing company.

Section 129(4)
A person may assume that the officers and agents of the company properly perform
their duties to the company.
1. At common law, a contract may be avoided by a company if the other party knew or
should have known that the relevant company officer was acting in breach of a
general law or statutory duty.

Section 129(5)
A person may assume that a document has been duly executed by a company if the
document appears to have been signed in accordance with s 127(1).
1. For the purposes of making this assumption, a person may also assume that anyone
who signs the document and states next to their signature that they are the sole
director and sole company secretary of the company occupies both offices.

Section 129(6)
A person may assume that a document has been duly executed by the company if:
(a) the company’s common seal appears to have been fixed to the document in
accordance with s 127(2); and
(b) the fixing of the seal appears to have been witnessed in accordance with that
section.
Note:
1. For the purposes of making this assumption, a person may also assume that anyone
who signs the document and states next to their signature that they are the sole
director and sole company secretary of the company occupies both offices.
2. The entitlement to make the s 129(5) and (6) assumptions is not dependent on
proof that the company had complied with all relevant provisions of its constitution or
that the company had authorised the document: see Myers v Aquarell Pty Ltd [2000]
VSC 429 at [72]-[74] per Gillard J.
3. The object of making an assumption that a document has been duly executed or
sealed is that the recipient of the document might fairly accept that it had been
Corporate Law #3, 9/11

executed or sealed with the company’s authority: see Brick and Pipe Industries Ltd v
Occidental Life Nominees Pty Ltd [1992] 2 VR 279; (1990) 3 ACSR 649 at 682; 9 ACLC
324 at 350-1 per Ormiston J (affirmed Brick and Pipe Industries Ltd v Occidental Life
Nominees Pty Ltd [1992] 2 VR 279; (1991) 6 ACSR 464; 100 ACLC 252, SC(Vic)).

Section 129(7)
A person may assume that an officer or agent of the company, who has authority to
issue a document or a certified copy of a document on its behalf, also has authority to
warrant that the document is genuine or is a true copy.
At common law, it is unclear whether a company officer such as a secretary, who has
authority to perform the ministerial act of issuing a document on behalf of the company,
also has implied actual or apparent authority to warrant that the document is genuine:
see Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at
151; 2 ACSR 161 at 166; 8 ACLC 611 at 617-18 per Mason CJ. Section 129(7) is intended
to overcome the decision in Ruben v Great Fingall Consolidated [1906] AC 439;
[1904-7] All ER Rep 460 where the House of Lords held that a company secretary had no
authority to warrant that a forged share certificate was genuine.

Section 129(8)
Without limiting the generality of this section, the assumptions that may be made under
this section apply for the purposes of this section.
1. Accordingly, the presumptions are cumulative.
2. For example, a person may be entitled to make several of the assumptions in
connection with a dealing with the company.
In Sunburst Properties Pty Ltd (in liq) v Agwater Pty Ltd [2005] SASC 335, one
issue was whether the persons who signed a contract for a company were directors of
the company at the time. The most recent documentation lodged with ASIC by the
company indicated that they were. Therefore, under s 129(2), the third party was
entitled to assume that they were directors of the company. It also meant that other
assumptions could then be made.

Pre-Registration Contracts
Persons who form a company (its promoters) sometimes seek to acquire property before
the company is registered with the intention that the property will be transferred to
the company after it is registered.
At common law, a company when formed is not bound by any contract purportedly
made on its behalf before the date of its incorporation.
Until a company is registered as a corporation it lacks legal personality. Since
contractual capacity runs, at least in part, with legal personality, it follows that a
company cannot be directly or indirectly a party to a contract prior to incorporation
(registration).
At common law, a company cannot ratify a pre-registration contract upon registration:
Kelner v Baxter (1866) LR 2 CP 174.
A principal cannot ratify a contract unless, at the time the contract was entered into, the
principal was in a position to enter into the contract on its own behalf.
In the case of a company, this meant that ratification was impossible unless the
company was registered at the date the relevant contract was made.
Note:
The only ways in which a corporation could benefit from a pre-registration contract were
(i) by the contract being novated to it; or (ii) by the benefit of the contract being
assigned to it, after registration.

Section 131(1)
Corporate Law #3, 10/11

If a person purports to enter into a contract on behalf of, or for the benefit of, a company
before it is registered, the company becomes bound by the contract if it, or a company
that is reasonably identifiable with it, is registered and ratifies the contract:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time – within a reasonable time after the contract is entered
into.
Note:
1. The person purporting to act for a company prior to it being registered must provide
a sufficient description of the company to allow a subsequently registered company
to be identified with it: see, for example, Herniman & Associates Pty Ltd v
Williams [2005] VCAT 2084 at [132]-[135] per Bowman J.
2. Section 131 will not apply where a person purports to contract for a company which
has been de-registered: McKeagg Contractors Pty Ltd v Howard Porter Pty Ltd
[2000] WADC 287. The position might be different if the person proposes to re-
register the company.

Section 131(2)
The person who purported to act for the unregistered company is liable to pay damages
to each other party to the contract if the company is:
(a) not registered, or
(b) is registered but fails to ratify it, or enter into a contract in substitute for it;
within the agreed time or, where there is no agreed time, within a reasonable time of
the pre-registration contract being entered into.
1. It is the company, and not the person who purported to act for it prior to registration,
that has the power to ratify the contract. The company's power to ratify the contract
may be exercised by an individual acting with the company's express or implied
authority and on behalf of the company: s 126(1). In some cases, that individual may
be the person who was party to the pre-registration contract: see, eg, Aztech
Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd (2005) 55 ACSR 1; 23
ACLC 1903; [2005] NSWCA 319; BC200506977 [contract ratified by the company's
promoter and directing mind]; MX Projects Pty Ltd v Hyber Pty Ltd [2007] VCAT
271.
A valid ratification does not necessarily involve use of the company's seal if it has a
seal: s 126(1). There is no special ratification procedure. In practice, a board of
directors will usually have the power to ratify a pre-registration contract: see, for
example, s 198A(2) which operates as a "replaceable rule". But, if the contract is with
a promoter, the board should be independent of the promoter. Ratification could
result from an express decision of an authorised company organ or agent, or it might
be inferred from part performance of the contract by the company. An officer, such
as a managing director, could also have actual or apparent authority to ratify an
agreement.
2. It is uncertain whether a s 131 ratification can occur without the other party to the
contract being informed.
3. No attempt has been made to define "a reasonable time". The courts are unlikely to
establish inflexible periods: Lifesavers (Aust) Ltd v Frigmobile Pty Ltd (1983) 1
NSWLR 431 at 438; ASC 55-251 per Hutley JA; Breeze v Cambridge Gulf Holdings
NL (SC(WA), Chapman J, No 1858/97, 27 November 1997, BC9706473, unreported).
All of the circumstances surrounding the contract should be relevant in determining
whether ratification is permissible. In Clasic International Pty Ltd v Lagos (2002)
11 BPR 20,573; (2003) NSW ConvR 56-053; BC200207201; [2002] NSWSC 1155, it
was held that ratification of a commercial property lease within a month of the pre-
registration contract being entered into was effective.
Corporate Law #3, 11/11

Ratification by the company


Within the time agreed by the parties to the contract or within a reasonable time
What's a reasonable time? A question of fact to be determined having regard to all
the circumstances - yes its vague and difficult to apply
Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2004] NSWSC
967 time agreed
promoter can still be liable s131(4)
• The amount that the person is liable to pay under s 131(2) is the amount that the
company would be liable to pay to the relevant party if it had ratified the contract
and then failed to perform it at all.
• A person who is liable under s 131(2) has no right to be indemnified by the
relevant company in respect of that liability. This is so even if the person
purported to act as a trustee for the company: s 132(2).
• To prevent the relevant company promoter avoiding liability under s 131(2) by
setting up a company with few if any assets to ratify the contract, s 131(4)
permits a court to order the person/promoter to pay all or part of the damages
that the company is ordered to pay to the other party.

Section 131(3)
If proceedings are brought against a promoter under s 131(2), because the company
has been registered but has failed to ratify the contract, or enter into a substitute
contract, the court may do anything that it considers appropriate in the circumstances
(such as order damages or transfer property).
The court could, for example, order the company to:
1. pay all or part of the damages that the person is liable to pay;
2. transfer property that the company received because of the contract to a party to the
contract; or
3. pay an amount to a party to the contract.

Promoter May Be Released From Liability


A party to a pre-registration contract may release a promoter from all or part of their
liability under s 131 to the party by signing a release: s 132(1).