61. Restrictions on commencement of business in certain circumstances

Question 1

61. Restrictions on commencement of business in certain circumstances

Answer 1

General overview
[61.01] This section lays down the conditions that must be satisfied before the public company can commence its business or exercise its borrowing powers. Hence, any contracts made before the company is legally allowed to commence business or any loans contracted by the company is a conditional contract which will not come into existence until the notice is issued by the registrar under s 61(3).

Question 2

Commencement of business or exercise of borrowing power

Answer 2

[61.02] Section 61(1) provides that a company having a share capital that has issued a prospectus inviting the public to subscribe for its shares shall not commence business or exercise any of its borrowing powers if (a) the money paid is or may be liable to be repaid to the applicant for the shares or debentures by reason of the failure of the company to obtain permission of the stock exchange for a listing of the shares or debenture; or unless (b)(i) the shares have been paid up in cash for the minimum subscription; (ii) the directors who have taken up or contracted to take up shares have paid up in cash to the proportion payable on application and allotment on the shares offered for public subscription; and (c) there has been lodged with the registrar a declaration in prescribed form by the secretary or authorised person that (b)(i) and (ii) have been complied with.

[61.03] The same conditions apply mutatis mutandis to a public company having a share capital that has not issued a prospectus: s 61(2). Such a public company shall lodge a statement in lieu of prospectus with the registrar, and further satisfies subsection (2)(b) and (c) before it can commence business or exercise any of its borrowing powers.

Question 3

Contracts made before notice by registrar

Answer 3

[61.04] Such contracts are provisional and do not bind the company until the notice has been issued. They become binding on the company from the date of the notice. Where a company had gone into liquidation without having become entitled to commence business, a claim by a person on a contract in breach of s 61 was disallowed