QUESTION FOUR

Ben has decided he will register a company to grow grapes and produce wine. He instructs his solicitor to draft a constitution for the proposed company. Whilst waiting for the solicitor to complete the work and before the company is registered, Ben meets a landowner who is prepared to lease suitable land to the proposed company. Ben has to act quickly to secure the land and so he signs a 20 year lease on behalf of the proposed company. 

The company is later registered and at the first directors’ meeting the ratification of Ben’s lease is considered. Another director offers different land which is of a superior quality for growing grapes.

REQUIRED:

(a)  How does corporate law classify the role undertaken by Ben role leading up to the registration of the company? What are the duties that such a person owes and to whom are they owed? Is the solicitor classified the same as Ben?

(b)  What is the effect on Ben and on the company if the directors decide not to ratify Ben’s lease.