SCENARIO: Global Water Initiative (GWI) is an NGO transitioning into a formal corporate structure. The founders decide to incorporate as a private company limited by guarantee. They submit their registration documents to Companies House. Before the certificate of incorporation is issued, one of the founders, Sarah, signs a lease for office space in the name of 'GWI Ltd'.
In a company limited by guarantee, what is the extent of the members' financial liability?
ACCA · Question 54 · Corporate and Business Law
SCENARIO: Global Water Initiative (GWI) is an NGO transitioning into a formal corporate structure. The founders decide to incorporate as a private company limited by guarantee. They submit their registration documents to Companies House. Before the certificate of incorporation is issued, one of the founders, Sarah, signs a lease for office space in the name of 'GWI Ltd'.
What is the legal status of the lease signed by Sarah?
Answer options:
The lease is binding on GWI Ltd once it is incorporated.
The lease is void and neither Sarah nor GWI Ltd is liable.
Sarah is personally liable on the lease.
GWI Ltd can simply ratify the lease after incorporation to remove Sarah's liability.
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