Section 21 (1) of the Act provides that persons who enter into an AIP „make a written agreement on behalf of or on behalf of a proposed company or purport to act.” According to Venalex (Pty) Ltd / Vigraha Property CC et al [2015] 2 All SA 645 (KZD) when the PIA is completed within the meaning of the law, individuals will act as agents of an unincorporated company. For their part, these people become „jointly responsible” if the proposed company is not created later or if the PIA is not fully ratified after its creation. In other words, all representatives are liable for losses incurred by the third party as a result of the company`s refusal. This is an immutable provision of the act that seeks to protect one-third of the IAP and means that officers cannot avoid such liability when using Section 21 PIAs. The new Companies Act therefore clearly imposes personal liability on those who have entered into the pre-foundation contract on behalf of the company, if the company subsequently refuses all or part of the contract. The assignment of liability in the event that the company does not ratify the pre-foundation contract when a pre-foundation contract is entered into on behalf of an untrained company is not a measure that can be taken lightly because of the personal liability of those who undertake to act on behalf of the company if the company refuses the contract. Anyone wishing to enter into a pre-foundation contract is therefore well advised to consult a corporate lawyer on how to guarantee protection against such possible liability. In this regard, it is not possible in the pre-foundation agreement to conclude that the personal liability provisions in Section 21 (2) of the Companies Act 2008 do not apply with respect to pre-foundation contracts. These provisions of the law are not expressed as „alternative provisions”, i.e. they are not provisions that the law allows the parties to agree. However, the language of Section 21, paragraph 2 (particularly the words „as stipulated in the foundation contract”) is such as to make the pre-foundation contract itself express itself so that the representative of the company does not have personal legal responsibility if the company is not incorporated or created and then refuses the contract.
