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You are here: Home / company resolutions / Resolution to ratify pre-incorporation contracts and preliminary expenses- Sample

Resolution to ratify pre-incorporation contracts and preliminary expenses- Sample

Last modified on April 24, 2024 by CA Bigyan Kumar Mishra

Pre-incorporation contracts are agreements entered between the promoters and different parties before the company’s incorporation. These are mainly related to the incorporation process of the company and incidental activities thereto. 

Such types of pre-incorporation contracts are also referred to as ‘preliminary contracts’. It can be to acquire some property or right or to incur several initial expenses for and on behalf of the company which is yet to be formed. 

Post incorporation, these types of pre-incorporation contracts have to be ratified in the meeting of the board of directors of the company.

Preliminary expenses are the initial expenses incurred by the promoters of the company in order to get the company registered with MCA.

Certain preliminary expenses are allowed to be amortised as per the Income tax law. 

After the incorporation process is over, the company’s Board of directors need to ratify these pre-incorporation contracts and preliminary expenses, in order to record in the books of accounts of the company and be reimbursed to the promoters.

Here are few sample resolution to be passed in order to ratify the pre-incorporation contracts

Sample 1- To ratify the pre-incorporation contracts

“RESOLVED THAT the following pre-incorporation contracts entered into by the promoters of the company be and are hereby ratified and affirmed:

1. Agreement dated 02-02-2022 with M/s. XYZ & Associates for legal and financial consultancy in relation to incorporation of the company;

2. Agreement dated 02-03-2022 with Mr. ABC Kumar for taking on lease the premises for the situation of the registered office of the company.

RESOLVED FURTHER THAT Mr, PQR Kumar, Managing Director of the company, be and is hereby authorised to do all such acts, deeds and things, including but not limited to execution of any required documents or instruments, which may be necessary to give effect to this resolution.”

Sample 2- To ratify the pre-incorporation contracts and to amortise the preliminary expenses

“RESOLVED THAT the following pre-incorporation contracts entered into by the promoters of the company be and are hereby ratified and affirmed:

1. Agreement with M/s. XYZ Private Limited for supply of raw materials dated 02/02/2022

2. Agreement with M/s. ABC & Associates for technical consultancy dated 02/03/2022

RESOLVED FURTHER THAT the following preliminary expenses incurred by the promoters of the company at the time of company’s incorporation be and is hereby approved and that the same will be amortised over the period of five financial years as per the income tax act, 1961, and accounting policy of the company:

1. Incorporation fees and stamp duty paid to the Ministry of Corporate Affairs;

2. Consultancy fees paid to M/s. ABC & Co, Chartered Accountants.

RESOLVED FURTHER THAT Mr. PQR Kumar, Managing Director of the company, be and is hereby authorised to do all such acts, deeds and things, including but not limited to execution of any required documents or instruments, which may be necessary to give effect to this resolution.”

Sample 4- A simple board resolution for adoption of preliminary expenses

“RESOLVED THAT the preliminary expenses for Rs. 22,500 incurred by the promoters of the company for the purpose of company’s incorporation as per the statement placed before the meeting be and are hereby approved.”

“RESOLVED FURTHER THAT the preliminary contracts entered into by the promoters in connection with the incorporation of the company as per the statement before the meeting be and are hereby approved.”

Sample 5 – To approve the pre-incorporation expenses

The Board was informed that an amount of Rs. 7,400 was incurred in connection with the incorporation of the Company, prior to the issue of certificate of incorporation by the Registrar of Companies, which is as under:

SI.No.ParticularsAmount (Rs.)
1Fees paid to the Registrar of Companies for company name availability, Stamp duties and others2,400
2Professional Fee paid to consultants for company registration5,000
Total7,400

The Board considered the same and passes the following resolution unanimously:

“RESOLVED THAT an amount of Rs. 7,400 (Seven thousand four hundred ruppees) incurred towards preliminary expenses as set out in the statement placed before the meeting be and is hereby ratified and the same be reimbursed to the promoters.

RESOLVED FURTHER THAT in pursuance with section 35D of the Income Tax Act, 1961, the preliminary expenses be amortised for an equal amount over a period of five years.”

Categories: company resolutions Tags: company resolutions

About the Author

CA. Bigyan Kumar Mishra is a fellow member of the Institute of Chartered Accountants of India.He writes about personal finance, income tax, goods and services tax (GST), stock market, company law and other topics on finance. Follow him on facebook or instagram or twitter.

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