Contractor s business not yet incorporated
Discussion
Thank you for your reply. I am presently in the process of selling at auction a piece of land. According to the agent only one person seemed interested in the land, with the agent refusing to disclose the person’s name. The agent requested what my preferred reserve price would be, and on receipt of the sale’s contract, the name of the business company is not incorporated. Search of the buyer’s solicitor, connects me to the neighbouring owner of the above land.
I just get the feeling that deception might have been used by both the agent and the potential buyer, since had I known the buyer’s true identity, then I might have held out for a higher price.
I just get the feeling that deception might have been used by both the agent and the potential buyer, since had I known the buyer’s true identity, then I might have held out for a higher price.
Jeremy-75qq8 said:
In a word they can't. If you contract to a non existant entity you have no contract with anyone.
This is wrong. See section 51(1) of the Companies Act 2006, which provides that:"A contract that purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly."
EW109 said:
Jeremy-75qq8 said:
In a word they can't. If you contract to a non existant entity you have no contract with anyone.
This is wrong. See section 51(1) of the Companies Act 2006, which provides that:"A contract that purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly."
Wings said:
What is the legal position with regards to a business person who signs an agreement contract in the company s name, when the business has yet to be incorporated.
Was the agreement made by "limited" company?Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
Mandat said:
Was the agreement made by "limited" company?
Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
What he said. But my understanding is that if you're a sole trader with a business called Fred Smith Plumbing and your name is Joe Bloggs you need to include your own name and and your company name on anything official such as a contract or invoice. In other words, you can't "hide" your own name.Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
Mandat said:
Was the agreement made by "limited" company?
Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
This is completely wrong, and points to a pretty fundamental misunderstanding of what a company is. A company only comes into existence when it is incorporated. No incorporation, no company. Unlimited companies are a thing, too, but again only exist once incorporated. Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
You don’t need to incorporate a company to run as a business, though - I’m guessing that may be what you meant.
bladebloke said:
Mandat said:
Was the agreement made by "limited" company?
Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
This is completely wrong, and points to a pretty fundamental misunderstanding of what a company is. A company only comes into existence when it is incorporated. No incorporation, no company. Unlimited companies are a thing, too, but again only exist once incorporated. Companies don't need to be incorporated to trade & make agreements, but they can't pass themselves off as "limited" if they are not.
You don t need to incorporate a company to run as a business, though - I m guessing that may be what you meant.
(1) The sole trader. It does not matter if Joe Bloggs calls himself “Joe Bloggs & Co” or “Bloggs Autoservices” – if it is just Joe Bloggs, he is a sole trader and is personally liable.
(2) The partnership of two or more persons (see the Partnership Act 1890) – say Joe Bloggs and John Smith, who trade as “Bloggs & Smith Autoservices” . There are no formalities required, and the partnership has no existence separate from the partners, who are each personally liable.
(3) A Limited Liability Partnership (or LLP) incorporated under the Limited Liability Partnerships Act 2000. An LLP “is a body corporate (with legal personality separate from that of its members)” (section 1(2) of the Act).
(4) A company (whether a limited company, a plc, or an unlimited company) incorporated under the Companies Act 2006 or its predecessors. Such a company is a legal person separate from its members.
It is only in case (4) that there is a “company”. While people in situation (1) or (2) may say that they have a “company” (meaning that they carry on business as a sole trader or in partnership under a style which is not just their name(s), such as “Brilliant Autoservices”) that is wholly inaccurate and potentially very misleading.
(NB. I am well aware of the old practice of calling a large partnership with a freely transferrable share capital created by a deed of settlement a “company” but that practice has long since fallen into disuse.)
EW109 said:
Let s be clear. For most practical purposes, there are four business structures:
(1) The sole trader. It does not matter if Joe Bloggs calls himself Joe Bloggs & Co or Bloggs Autoservices if it is just Joe Bloggs, he is a sole trader and is personally liable.
(2) The partnership of two or more persons (see the Partnership Act 1890) say Joe Bloggs and John Smith, who trade as Bloggs & Smith Autoservices . There are no formalities required, and the partnership has no existence separate from the partners, who are each personally liable.
(3) A Limited Liability Partnership (or LLP) incorporated under the Limited Liability Partnerships Act 2000. An LLP is a body corporate (with legal personality separate from that of its members) (section 1(2) of the Act).
(4) A company (whether a limited company, a plc, or an unlimited company) incorporated under the Companies Act 2006 or its predecessors. Such a company is a legal person separate from its members.
It is only in case (4) that there is a company . While people in situation (1) or (2) may say that they have a company (meaning that they carry on business as a sole trader or in partnership under a style which is not just their name(s), such as Brilliant Autoservices ) that is wholly inaccurate and potentially very misleading.
(NB. I am well aware of the old practice of calling a large partnership with a freely transferrable share capital created by a deed of settlement a company but that practice has long since fallen into disuse.)
But in cases 1 and 2 the names of the proprietors must form part of the "company" name, unless they are "T/A". So J. Bloggs and A. Smith T/A Jones and Fisher. Or J. Bloggs and A.Smith T/A ABC Automotive Services. (1) The sole trader. It does not matter if Joe Bloggs calls himself Joe Bloggs & Co or Bloggs Autoservices if it is just Joe Bloggs, he is a sole trader and is personally liable.
(2) The partnership of two or more persons (see the Partnership Act 1890) say Joe Bloggs and John Smith, who trade as Bloggs & Smith Autoservices . There are no formalities required, and the partnership has no existence separate from the partners, who are each personally liable.
(3) A Limited Liability Partnership (or LLP) incorporated under the Limited Liability Partnerships Act 2000. An LLP is a body corporate (with legal personality separate from that of its members) (section 1(2) of the Act).
(4) A company (whether a limited company, a plc, or an unlimited company) incorporated under the Companies Act 2006 or its predecessors. Such a company is a legal person separate from its members.
It is only in case (4) that there is a company . While people in situation (1) or (2) may say that they have a company (meaning that they carry on business as a sole trader or in partnership under a style which is not just their name(s), such as Brilliant Autoservices ) that is wholly inaccurate and potentially very misleading.
(NB. I am well aware of the old practice of calling a large partnership with a freely transferrable share capital created by a deed of settlement a company but that practice has long since fallen into disuse.)
carl_w said:
EW109 said:
Let s be clear. For most practical purposes, there are four business structures:
(1) The sole trader. It does not matter if Joe Bloggs calls himself Joe Bloggs & Co or Bloggs Autoservices if it is just Joe Bloggs, he is a sole trader and is personally liable.
(2) The partnership of two or more persons (see the Partnership Act 1890) say Joe Bloggs and John Smith, who trade as Bloggs & Smith Autoservices . There are no formalities required, and the partnership has no existence separate from the partners, who are each personally liable.
(3) A Limited Liability Partnership (or LLP) incorporated under the Limited Liability Partnerships Act 2000. An LLP is a body corporate (with legal personality separate from that of its members) (section 1(2) of the Act).
(4) A company (whether a limited company, a plc, or an unlimited company) incorporated under the Companies Act 2006 or its predecessors. Such a company is a legal person separate from its members.
It is only in case (4) that there is a company . While people in situation (1) or (2) may say that they have a company (meaning that they carry on business as a sole trader or in partnership under a style which is not just their name(s), such as Brilliant Autoservices ) that is wholly inaccurate and potentially very misleading.
(NB. I am well aware of the old practice of calling a large partnership with a freely transferrable share capital created by a deed of settlement a company but that practice has long since fallen into disuse.)
But in cases 1 and 2 the names of the proprietors must form part of the "company" name, unless they are "T/A". So J. Bloggs and A. Smith T/A Jones and Fisher. Or J. Bloggs and A.Smith T/A ABC Automotive Services. (1) The sole trader. It does not matter if Joe Bloggs calls himself Joe Bloggs & Co or Bloggs Autoservices if it is just Joe Bloggs, he is a sole trader and is personally liable.
(2) The partnership of two or more persons (see the Partnership Act 1890) say Joe Bloggs and John Smith, who trade as Bloggs & Smith Autoservices . There are no formalities required, and the partnership has no existence separate from the partners, who are each personally liable.
(3) A Limited Liability Partnership (or LLP) incorporated under the Limited Liability Partnerships Act 2000. An LLP is a body corporate (with legal personality separate from that of its members) (section 1(2) of the Act).
(4) A company (whether a limited company, a plc, or an unlimited company) incorporated under the Companies Act 2006 or its predecessors. Such a company is a legal person separate from its members.
It is only in case (4) that there is a company . While people in situation (1) or (2) may say that they have a company (meaning that they carry on business as a sole trader or in partnership under a style which is not just their name(s), such as Brilliant Autoservices ) that is wholly inaccurate and potentially very misleading.
(NB. I am well aware of the old practice of calling a large partnership with a freely transferrable share capital created by a deed of settlement a company but that practice has long since fallen into disuse.)
But the fact that a sole trader or partnership has a "business name" (the expression used in the Companies Act) does not mean that there is a "company".
My belief is that the successful bidder wishes to hide their true identity, my request to the agent for that information has been denied to me, making the sale process failing to be both open and transparent.
Had I known their true identity, then due to both supply and demand, being neighbours to the land, then i would have expected a higher purchase price. I therefore need a reason to back out of the contract.
Had I known their true identity, then due to both supply and demand, being neighbours to the land, then i would have expected a higher purchase price. I therefore need a reason to back out of the contract.
Completely normal for properties to be bought via an SPV (special purpose vehicle) for a variety of reasons, but mainly for a Stamp Duty reduction scheme or ring fencing debt. An SPV is a company created purely for the purpose of holding a property, often created between exchange and completion as appears to be happening here.
However, at some point the solicitors will need to complete their AML and CDD’s to check where the money originates at which point the owners of the SPV will have to be disclosed.
However again, if you wanted to hold out for more money from a special purchaser you made an error selling via auction. That only works when there’s more than one special purchaser. Did you discuss this with your agent and the potential downsides of selling via auction?
Speak to your solicitor.
However, at some point the solicitors will need to complete their AML and CDD’s to check where the money originates at which point the owners of the SPV will have to be disclosed.
However again, if you wanted to hold out for more money from a special purchaser you made an error selling via auction. That only works when there’s more than one special purchaser. Did you discuss this with your agent and the potential downsides of selling via auction?
Speak to your solicitor.
Wings said:
My belief is that the successful bidder wishes to hide their true identity, my request to the agent for that information has been denied to me, making the sale process failing to be both open and transparent.
Had I known their true identity, then due to both supply and demand, being neighbours to the land, then i would have expected a higher purchase price. I therefore need a reason to back out of the contract.
Had I known their true identity, then due to both supply and demand, being neighbours to the land, then i would have expected a higher purchase price. I therefore need a reason to back out of the contract.
What has actually been signed? Is it a formal contract sufficient to satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (because without that there is no binding contract)? How does it identify the purchaser?
I’m very confused about what is actually going on here.
OP, you originally mentioned selling at auction but now you’ve clarified that’s not the case. If it’s a sale agreed via an agent then said agent is surely acting for you, so I can’t imagine why they would’ve withheld details about the person from whom you were accepting an offer from you. Then coming onto the ‘contract’, if it’s all a sale by private agreement then almost universally it would be your solicitor who draws up the contract. So how could that have happened without you knowing who the purchaser was?
I’m afraid nothing really makes sense here. You should speak to your solicitor to find out what your position is.
OP, you originally mentioned selling at auction but now you’ve clarified that’s not the case. If it’s a sale agreed via an agent then said agent is surely acting for you, so I can’t imagine why they would’ve withheld details about the person from whom you were accepting an offer from you. Then coming onto the ‘contract’, if it’s all a sale by private agreement then almost universally it would be your solicitor who draws up the contract. So how could that have happened without you knowing who the purchaser was?
I’m afraid nothing really makes sense here. You should speak to your solicitor to find out what your position is.
Apologies, it was listed for auction, with twenty two people requesting legal pack. During the auction process I was asked if I would consider an offer, I replied “no”, leaving according to the agent only one person was left interested the day before the auction. Agent refused to name the interested person, and if I did not accept the reserve amount, then I would be charged their selling fee.
The agent actions appears to be more in the interest of the buyer, rather than their client, the seller, particularly in the avoidance of naming the interested person, buyer.
Other than the agent, I have signed no sales contract.
The agent actions appears to be more in the interest of the buyer, rather than their client, the seller, particularly in the avoidance of naming the interested person, buyer.
Other than the agent, I have signed no sales contract.
You need to check your contract with the agent, you can likely get out of the sale but you're likely liable for the sale fee. They provided a buyer that met your reserve. If you wanted to sell it for more then you either needed to chance the auction or raise your reserve.
Usual caveat these are just thoughts from a non-expert!
Usual caveat these are just thoughts from a non-expert!
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