Pre-Incorporation Contracts Lawyers in India

Starting a new business requires careful planning, legal clarity, and a strong foundation. One of the most important steps before registering a company is entering into pre-incorporation contracts. These agreements protect the interests of promoters and lay down essential arrangements for the future company.

Our team of expert corporate lawyers provides comprehensive assistance in drafting, reviewing, and negotiating pre-incorporation contracts across India. With our proven expertise, we ensure that your business incorporation journey is legally secure, structured, and dispute-free.

What are pre-incorporation contracts?

Pre-incorporation contracts are agreements that promoters enter into before a company is formally incorporated in order to secure essential rights, property, or services required for the upcoming business.

These contracts are crucial for:

  • Acquiring property or office space.

  • Arranging funding and opening provisional bank accounts.

  • Appointing key vendors, employees, or suppliers.

  • Establishing terms with co-promoters or investors.

Types of Pre-Incorporation Contracts

  1. Internal Arrangements—Agreements among promoters regarding shareholding, responsibilities, and contribution of capital.

  2. Business Arrangements—Agreements with third parties (such as landlords, vendors, or service providers) to secure resources for the future company.

Legal Position of Pre-Incorporation Contracts in India

  • Under the Indian Contract Act, 1872, pre-incorporation contracts are generally considered invalid because a company does not exist as a legal entity before its incorporation.

  • However, The Specific Relief Act, 1963, provides enforceability for such contracts.

    • Section 15(h)—Promoters may enter into contracts for the benefit of a company prior to incorporation, which the company can later adopt.

    • Section 19(e)—The other contracting party can also enforce such contracts against the company once incorporated.

Thus, while pre-incorporation contracts are not binding automatically, they become enforceable once the company formally adopts and ratifies them after incorporation.

Benefits of Pre-Incorporation Contracts

✔ Secures essential rights and assets for the company before incorporation.
✔ Provides clarity on promoter responsibilities and capital contribution.
✔ Helps attract investors with a structured business plan.
✔ Reduces disputes among promoters and third parties.
✔ Establishes groundwork for smooth incorporation.

Key Clauses in a Pre-Incorporation Contract

A well-drafted pre-incorporation agreement should include the following:

  1. Name of the Proposed Company—Future legal identity of the business.

  2. Object Clause – Purpose and business objectives of the proposed company.

  3. Proposed Business Address – Registered office and operational location.

  4. Name of Proposed Directors/Promoters – Individuals responsible for incorporation.

  5. Capital Contribution – Investment by each promoter or shareholder.

  6. Banking Arrangements – Provisional opening of bank accounts.

  7. Authorized Representative – Person authorized to sign and act on behalf of promoters.

  8. Transfer of Rights & Property – Assignment of rights acquired by promoters to the future company.

  9. Reimbursement of Expenses – Promoters’ incorporation-related expenses to be reimbursed by the company.

  10. Duties & Obligations of Promoters – Roles, responsibilities, and fiduciary duties.

  11. Indemnity Clause – Protection of promoters in case of contract non-performance before incorporation.

  12. Termination Clause—Circumstances under which the agreement stands void.

  13. Adoption Clause – Requirement for the company to adopt the contract post-incorporation.

  14. Confidentiality Clause – Protection of sensitive business data and plans.

  15. Governing Law & Jurisdiction—Applicable law (Indian Contract Act, Specific Relief Act) and dispute resolution mechanism.

  16. Force Majeure—Relief in case of unforeseen events (pandemics, natural disasters, and government restrictions).

Industries Where Pre-Incorporation Contracts Are Common

✔ Real Estate & Construction (property acquisition, lease agreements)
✔ Startups & Technology Ventures (founder agreements, vendor contracts)
✔ Manufacturing & Supply Chain (raw materials, equipment purchase)
✔ Healthcare & Pharma (R&D collaboration, licensing deals)
✔ Retail & Franchising (premises, branding rights)

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