Legal acts can already be performed on behalf of a private limited company in incorporation. However, caution is required, because the person who has performed the acts on behalf of the B.V. under formation may be personally called upon to fulfil the obligations entered into.
First, I will go into the legal regulations and then discuss a recent example from the jurisprudence.
Statutory regulation acting on behalf of B.V. in formation
Legal acts can already be performed on behalf of a private limited company in incorporation. The company can only become bound to this if it ratifies the legal acts after its incorporation. The ratification can take place explicitly or tacitly. As long as no ratification has taken place, the persons who performed the legal act on behalf of the private limited liability company to be incorporated will remain jointly and severally bound, unless expressly stipulated otherwise. The term ‘jointly and severally liable’ means that all connected parties may be sued by the creditor for the full amount.
The Arnhem-Leeuwarden Court of Appeal has rendered a judgment on this arrangement. It concerned the following.
Case: no confirmation of a legal act performed on behalf of B.V. in formation.
On behalf of a B.V. in formation, lease agreements have been concluded concerning vehicles. The person who performed these legal acts on behalf of the B.V. under formation (hereinafter referred to as ‘the intended driver’) has hereby stipulated that a third party (a Swiss company) is jointly and severally liable for the obligations arising from the agreements.
The B.V. is ultimately not incorporated and therefore no ratification can take place. The lease company appeals to the intended director.
The intended driver defends himself by stating that it has been expressly stipulated that he is not jointly and severally liable. This would appear from the agreement that the Swiss company guarantees compliance with the obligations. The Court had to assess whether this defence was valid.
Liability for juridical act performed on behalf of B.V. in incorporation, despite stipulated guarantee of third party
The Court of Appeal is of the opinion that the fact that it has been stipulated that the third party is jointly and severally liable does not mean that the intended director has stipulated that he is not (also) liable. If the proposed director had wished to stipulate that he is not liable, he should have done so explicitly. He is therefore ordered to pay to the lease company.
If you wish to exclude liability for legal acts on behalf of a B.V. under formation, you must explicitly stipulate that you are not liable.
This shows that a great deal of caution is required when acting on behalf of a company to be incorporated. If the person performing the legal act on behalf of the B.V. under formation wishes to exclude that he is (jointly and severally) associated, he must explicitly stipulate so.
Should you have any questions about legal acts on behalf of a B.V. in formation, please contact one of our corporate lawyers.
