The acceleration of company registration procedures has reduced the importance of the pre-incorporation phase, but it is a necessary stage in the life of any company.
The pre-company is created by the signature of the founders of the memorandum and articles of association and countersigned by a lawyer, and is dissolved by registration in the Trade Register or by the final refusal of an application for registration or the withdrawal of the application for registration.
Although the pre-company is formed as described above, it may not commence commercial activities until the application for registration has been filed with the Commercial Court.
The tax authority will then establish the tax number for the pre-company, stating that this is not otherwise a necessary condition for carrying out the economic activity, but that care must be taken in the economic activity carried out at this stage in order to ensure that the tax deduction is exercised in a lawful manner. [KGD.2008. 176] If, however, the tax authority refuses to issue a tax number, the founders are jointly and severally liable for the tax obligations of the pre-company. [Art. 22]
The pre-corporate nature of the company must be indicated in the company's documents and declarations; failing this, a declaration made by the pre-corporate company is, if the company is not registered, a declaration made jointly by the founders.
A pre-company is not a separate legal form: it is governed by the rules applicable to the company which it is intended to set up, except that there can be no change in the members except by operation of law, i.e. the shares cannot be transferred; it cannot form or become a member of a company; it cannot be the subject of proceedings to exclude a member; and it cannot be the subject of a transformation, merger, division or dissolution without succession. In the pre-company stage, the articles of association may not be amended, except upon request of the court of registration and the body competent to grant official authorisation, but the Civil Code does not preclude the members of the pre-company from amending the articles of association, with the amendment taking effect on the day following the registration of the company. [BDT2006. 1453.]
The pre-company may therefore conclude contracts after the application for registration, which are considered legal transactions of the company after registration. If, however, the registration of the company is finally refused or the application for registration is withdrawn, the pre-company must cease to exist without delay and the obligations entered into must be met out of the assets made available to the company being formed.
The founders shall be jointly and severally liable to third parties for any claims that cannot be settled. If, in the company being formed, the liability of the member for the obligations of the company has been limited and there remain, despite the member's liability, unpaid debts, the directors of the company being formed shall be jointly and severally liable to third parties for such debts.