Starting a business often involves finding the perfect location—whether it’s a small office, retail space, or manufacturing unit. But what happens if you haven’t yet registered your company? Can you still buy or lease property?

The short answer: Yes, you can—but there are some legal and practical caveats you must understand.


📜 Pre-Incorporation Contracts: The Legal Foundation

Under Sri Lanka’s Companies Act No. 07 of 2007, business founders can enter into what are called pre-incorporation contracts.

What’s a Pre-Incorporation Contract?

A pre-incorporation contract is any agreement:

  • Made in the name of a company before it legally exists, or
  • Entered into on behalf of the company, in anticipation of it being registered.

These contracts can cover things like:

  • Leasing commercial space
  • Buying property
  • Hiring employees
  • Ordering equipment

🏠 Scenario 1: Renting a Property Before Company Registration

You’re opening a boutique clothing store in Colombo. You find the perfect location and want to lock it in before someone else takes it. But your company, LuxeStyle (Pvt) Ltd., hasn’t been registered yet.

Can you sign the lease now?

✅ Yes, with conditions:

  • Sign the lease as an individual, noting that it’s on behalf of the soon-to-be-formed LuxeStyle (Pvt) Ltd.
  • Include a clause that the lease is subject to ratification by the company once incorporated.
  • After registration, the company must officially ratify (approve) the lease.

🧠 Important:

If your company never gets registered or fails to ratify the lease, you are personally liable for the rent.


🏡 Scenario 2: Buying Property in the Name of the Company

Let’s say you’re investing in land to build a factory for GreenTech Manufacturing Ltd., which hasn’t been incorporated yet.

Can you buy the property now?

✅ Yes, but not in the company’s name (yet).
Since the company doesn’t legally exist, you can’t register the property directly under its name. But you can:

  1. Enter a Sale Agreement as a promoter/founder, clearly stating:
    • You’re buying the land on behalf of the company.
    • The contract will be ratified by the company upon incorporation.
  2. Once the company is registered, the board can ratify the purchase and transfer the title to the company’s name.

⚠️ Caution:

If the company is never formed or fails to ratify the deal, you’ll remain the legal owner and bear full responsibility.


⚖️ What the Law Says (In Simple Terms)

Under the Companies Act No. 07 of 2007:

  • Section 23 allows a company to ratify any pre-incorporation contract after it is registered.
  • Section 24 places implied warranties on the person signing the contract—that the company will be registered and will ratify the deal.
  • If the company never ratifies, you can be held personally responsible.
  • Section 25 allows courts to intervene if property was transferred but the contract wasn’t ratified.

📋 Key Takeaways for Business Owners

✅ Do❌ Don’t
Include a ratification clauseSign as if the company already exists
Use clear legal language: “on behalf of the proposed company”Omit your personal name entirely
Ratify the contract as soon as possible after incorporationDelay incorporation for too long
Consult a lawyer for major property dealsAssume all contracts are automatically valid

🔑 Final Word

Yes, you can buy or rent property for your business before it’s officially registered—but you need to protect yourself legally. Always draft contracts clearly, document intent, and ratify everything as soon as your company is incorporated.

If you’re unsure how to draft or negotiate a pre-incorporation property agreement, speak to a lawyer or business consultant.

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