It is common — and entirely sensible — for founders to start signing supplier contracts, leases and even employment offers before the Singapore company is formally incorporated with ACRA. But who is bound by those contracts? And once the company exists, can it adopt them retrospectively?
Section 41 of the Companies Act 1967 is the answer. This 2026 guide walks through how it works, what founders should do (and avoid) and why the timing of incorporation matters.
The common-law starting point
At common law, a company that does not yet exist cannot be bound by a contract. Anyone signing “for and on behalf of” a yet-to-be-incorporated company is personally liable. The contract cannot later be ratified by the company once it exists, because ratification requires the principal to have existed at the time the agent acted.
That common-law rule made it almost impossible for promoters to do pre-incorporation deals safely. Singapore solved the problem with Section 41.
What Section 41 does
Section 41(1) of the Companies Act 1967 states that any contract or transaction purporting to be made before a company’s formation may be ratified by the company after its incorporation. Once ratified, the company is bound as if it had been a party from the start, and is entitled to the benefit of the contract.
Section 41(2) protects the counterparty: until ratification, the person who signed on the company’s behalf is personally liable. After ratification, that personal liability falls away — unless the parties agreed otherwise.
Mechanics of ratification
Ratification does not require any special form. In practice, it is done by a directors’ resolution shortly after incorporation, recorded in the company’s minute book. Best practice is to:
- List every pre-incorporation contract in a schedule to the resolution;
- Attach copies of the contracts;
- Notify the counterparties in writing that the company has adopted the agreement;
- Re-issue invoices and onboarding documents in the company’s name.
What if the company is not incorporated as planned?
If incorporation fails or the founders abandon the project, the signatory remains personally liable. Section 41 only operates once the company actually comes into existence — there is no automatic relief.
For this reason, many promoters prefer to delay material commitments until after ACRA has issued the certificate of incorporation. Where that is not feasible, founders should:
- Add an express clause confirming that the contract is entered into pre-incorporation and is subject to Section 41 ratification;
- Cap personal liability or seek a counterparty indemnity until ratification; and
- Avoid signing leases or PG-backed facilities until the company is incorporated.
Common pre-incorporation deals
- Supplier agreements — software subscriptions, payment processors, accounting software.
- Office leases — many landlords will accept a “to be incorporated” lessee subject to ratification.
- Employment offer letters — particularly common where the founder is recruiting senior talent before launch.
- Founders’ agreements — IP assignments and shareholder agreements drafted before incorporation.
Each of these can be picked up by the company under Section 41 — but only if the company actually decides to adopt them.
Tax consequences of ratification
From IRAS’s perspective, expenses incurred before incorporation are generally not deductible against the company’s Year of Assessment income — there is no taxpayer to deduct from at the time the expense was incurred. However, IRAS’s pre-commencement expenses concession permits certain qualifying revenue expenses incurred in the year of commencement to be deducted against post-commencement income.
This is a separate concept from Section 41 ratification: Section 41 fixes the contractual position; the IRAS concession addresses the tax position. Both matter for early-stage founders.
Drafting tips
- Sign as “[Name], promoter for [Newco] (to be incorporated in Singapore)” — clearer than the bare “for and on behalf of” wording.
- Add a clause: “The parties acknowledge that the Company is to be incorporated in Singapore and will ratify this Agreement under Section 41 of the Companies Act 1967 within 60 days of incorporation.”
- For high-value contracts, include a counterparty indemnity if ratification does not occur — gives the founder fallback comfort.
How RCS can help
Raffles Corporate Services advises founders on incorporation timing, drafts board resolutions to ratify pre-incorporation contracts, and ensures the company’s statutory registers and tax filings reflect the adopted arrangements. For founders planning a more complex group structure from day one — for example a Singapore parent over an overseas operating entity — see our foreign subsidiary setup guide.
— The Editorial Team, Raffles Corporate Services