Vireo plc was registered as a public company on its incorporation. Before it obtains a trading certificate, its directors sign a contract on its behalf to buy equipment from Altus Ltd. Vireo plc then fails to pay. What is the legal position?

Correct answer: B) The contract is valid, but the company and its officers in default commit an offence, and if the company fails to meet its obligations after being called on to do so, the directors are jointly and severally liable to indemnify Altus Ltd

Explanation

Under s761 Companies Act 2006, a company registered as a public company on its original incorporation must not do business or exercise borrowing powers until the registrar issues a trading certificate confirming that its allotted share capital is at least the authorised minimum. Under s767, breach is an offence by the company and every officer in default, but the validity of the transaction is not affected. If the company fails to comply with its obligations within 21 days of being called on to do so, the directors at the time are jointly and severally liable to indemnify the other party for its resulting loss.