Company contracts

19. (1) A contract or other enforceable obligation may

be entered into by a company as follows :—

(a) an obligation which, if entered into by a natural person is required by law to be in writing signed by that person and be notarially attested, may be entered into on behalf of the company in writing signed under the name of the company by —

(i) two directors of the company;

(ii) if there be only one director, by that director ;

(iii) if the articles of the company so provide, by any other person or class of persons; or

(iv) one or more attorneys appointed by the company, and be notarially executed;

(b) an obligation which, if entered into by a natural person is required by law to be in writing and signed by that person, may be entered into on behalf of the company in writing signed by a person acting under the company’s express or implied authority;

(c) an obligation which if entered into by a natural person is not required by law to be in writing, may be entered into on behalf of the company in writing or orally, by a person acting under the company’s express or implied authority.

(2) The provisions of subsection (1) shall apply to a contract or other obligation —

(a) whether or not that contract or obligation is entered into in Sri Lanka; and

(c) whether or not the law governing the contract or obligation is the law of Sri Lanka.

(3) For the purpose of this section, a company may use a generally recognised abbreviation of any word in the name, unless it is misleading to do so.

20. (1) Subject to its articles, a company may by an instrument in writing executed in accordance with the provisions of section 19, appoint a person as its attorney either generally or in relation to a specified matter. Attorneys.

(2) Any act of the attorney carried out in accordance with the instrument referred to in subsection (1), shall be binding on the company.

(3) The provisions of the Powers of Attorney Ordinance (Chapter 122) and the law relating to powers of attorney executed by a natural person, shall with necessary modifications, apply in relation to a power of attorney executed by a company to the same extent as if the company was a natural person, and as if the commencement of the liquidation or if there is no liquidation, the removal of the company from the Register, was the death of a person.

21. (1) A company or a guarantor of an obligation of the company or any person claiming under the company, may not assert against a person dealing with that company or with any person who has acquired rights from the company, that —

(a) the articles of the company have not been complied with ; or

(b) the persons named in the most recent notice filed under section 223 or the annual return delivered under section 131of this Act, are not the directors or the secretary of the company, as the case may be ; or

(c) a person held out by a company as a director, officer or agent of the company—

(i) has not been duly appointed; or

(ii) does not have authority to exercise the powers and perform the duties that are customary in the business of the company or are normal for a director, officer or agent of a company carrying on business of the kind carried on by that company; or

(d) a document issued by any director, the secretary of the company or by any officer or agent, with actual or normal authority to issue the document, is not valid or genuine, unless that person has, or by virtue of that person’s position with or relationship to the company, ought to have knowledge to the contrary.

(2) The provisions of subsection (1) shall apply even in a situation where a person referred to in paragraphs (b) to (d) of that subsection acts fraudulently or forges a document that appears to have been signed on behalf of the company, unless the person dealing with the company or who has acquired rights from the company, has actual knowledge of such fraud or forgery.

 22. Subject to the provisions of subsection (3) of section 105, a person shall not be affected by or deemed to have notice or knowledge of the contents of the articles of company or any other document relating to a company, by reason only of the fact that it has been delivered to the Registrar for filing or is available for inspection at any office of the company.

PRE-INCORPORATION CONTRACTS

23. (1) For the purpose of this section and sections 24 and 25 of this Act, the expression “pre-incorporation

contract” means —

(a) a contract purported to have been entered into by a company before its incorporation; or (b) a contract entered into by a person on behalf of a company before and in contemplation of its incorporation.

(2) Notwithstanding anything to the contrary in any law, a pre-incorporation contract may be ratified within such period as may be specified in the contract or if no such period is specified, within a reasonable time after the incorporation of such company, in the name of which or on behalf of which it has been entered into.

(3) A pre-incorporation contract that is ratified under subsection (2), shall be as valid and enforceable as if the company had been a party to the contract at the time it was entered into.

(4) A pre-incorporation contract may be ratified by a company in the same manner as a contract may be entered into on behalf of a company under section 19.  

24. (1) Notwithstanding anything to the contrary in any law, in a pre-incorporation contract, unless a contrary intention is expressed in the contract, there shall be an implied warranty by the person who purports to enter into such contract in the name of or on behalf of the company—

(a) that the company will be incorporated within such period as may be specified in the contract, or if no period is specified, within a reasonable time after the making of the contract; and

(b) that the company will ratify the contract within such period as may be specified in the contract or if no period is specified, within a reasonable time after the incorporation of such company.

(2) The amount of damages recoverable in an action for breach of an implied warranty referred to in subsection (1), shall be the same as the amount of damages that may be recoverable in an action against the company for damages for breach by the company of the unperformed obligations under the contract, if the contract had been ratified by the company.

(3) Where after its incorporation, a company enters into a contract in the same terms as or in substitution for, a preincorporation contract (not being a contract ratified by the company under section 23), the liability of a person under subsection (1) shall be discharged.

25. Where a company has acquired property pursuant to a pre-incorporation contract that has not been ratified by the company after its incorporation, a court may on an application made in that behalf by the party from whom the property was acquired, make an order —

(a) directing the company to return property acquired under the pre-incorporation contract, to that party;

(b) validating the contract in whole or in part; or (c) granting any other relief in favour of that party relating to that property acquired.