ExpertACCA · Question 54 · The formation and constitution of business organisations
Scenario: 'Urban Canopy Initiatives', a community group, wants to form a corporate entity to buy land for rooftop forests. They want limited liability to protect their members, but they do not want to issue shares, and any surplus income will be reinvested into the community rather than distributed as profit. Before incorporation, founder Elena signs a contract for a crane in the name of 'Urban Canopy Initiatives Ltd'.
Question: Once the company is incorporated, which TWO of the following methods can be used to legally transfer the liability for the crane contract from Elena to the new company?
Scenario: 'Urban Canopy Initiatives', a community group, wants to form a corporate entity to buy land for rooftop forests. They want limited liability to protect their members, but they do not want to issue shares, and any surplus income will be reinvested into the community rather than distributed as profit. Before incorporation, founder Elena signs a contract for a crane in the name of 'Urban Canopy Initiatives Ltd'.
Question: Once the company is incorporated, which TWO of the following methods can be used to legally transfer the liability for the crane contract from Elena to the new company?
Answer options:
Ratification of the contract by the board of directors.
Novation of the contract.
Drafting a completely new contract between the company and the supplier.
Passing an ordinary resolution at a general meeting.
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