Contracts before Cyprus company incorporation: identify who is promising what

A customer wants to sign today, but your Cyprus company is still being formed. A landlord wants a deposit before the name is approved. A supplier asks for a purchase order while you are waiting for the incorporation documents.

These are ordinary commercial pressures, but the answer cannot be "put the new company name on everything". The contracting party, the authority to sign and the conditions matter. Identify them before accepting the obligation.

Check whether the company actually exists

A shortlist, name approval or formation instruction is not the incorporation itself. Establish the company's actual status and incorporation date before treating it as an existing contracting party.

Keep the approved name and proposed structure separate from the final incorporation evidence. If a preferred name changes, an agreement describing the proposed entity may need attention. If the business never forms, a contract still needs an explanation of who made the promise.

The registration guide explains the broader sequence. This article concerns commitments made while that process is incomplete.

Understand the Cyprus rule without overextending it

Section 15A addresses contracts made before incorporation by subscribers to the memorandum, or people authorised by them, in the name or on behalf of the company being formed. It states that such a contract is temporary before incorporation and becomes binding on the company after incorporation.

The provision also addresses failure to incorporate and expressly conditional obligations. Read the actual agreement against the statutory wording. A contract made personally is not automatically the same as one made on behalf of a company in formation.

Avoid applying a general rule from an overseas incorporation article. Different countries use different approaches to pre-incorporation contracts. A generic statement that every contract must be novated, or that every promise automatically passes to the company, may be wrong for the facts.

Identify the situation before signing

A heading reading "for the company" may be insufficient if the rest of the agreement names you personally or gives a personal guarantee. Read the parties clause, signature block, payment terms, guarantees and termination provisions together.

Consider what happens if incorporation fails

The current statute says that, if the company is not formed, relevant obligations may remain obligations of the people who undertook them, with unlimited joint and several liability. It contains a separate provision where the obligations were expressly assumed on the condition of incorporation.

That makes the failure scenario worth discussing while everyone still expects formation to succeed. What if the name is rejected, the founders disagree or the business needs a licence it cannot obtain? Who holds the deposit? Does the customer receive a refund? Who owns work delivered before the company exists?

A condition needs proper drafting. Do not add a casual sentence to an agreement and assume it overrides contradictory payment or guarantee clauses. Ask the drafter to explain the consequences in the actual document.

Work through a supplier example

In this illustrative case, two founders plan a Cyprus retail company and order equipment before incorporation. The supplier wants 3,000 euros as a deposit and a promise to pay the balance on delivery.

The purchase document names one founder personally, while the email thread says the order is for the future company. The founder pays from a personal account. None of that establishes a clear agreed route for the obligation.

Before signing, the parties should identify who is buying, whether the order is for a company in formation, who has authority and what happens if incorporation does not complete. They should also agree who will receive any refund and how the final invoice will identify the customer.

After incorporation, the company records need the final agreement, evidence of the deposit and the decision about the founder's payment. A bank transfer from the company to the founder should not be created merely to make the old payment disappear.

Separate the contract from expense treatment

A contract may explain who owes a supplier. Accounting and tax treatment require further evidence. Keep the agreement, invoice, proof of payment and the business purpose together.

An owner's payment might create a reimbursement claim or another documented arrangement. The fact that the company later uses an asset does not tell you automatically who bought it or whether every cost belongs in its books.

Use the pre-establishment expenses guide to organise supporting documents. For invoices issued after formation, check the Cyprus invoice requirements guide. Neither replaces review of an ambiguous contract.

Create a handover register at incorporation

List every arrangement entered into during formation. Include signed contracts, deposits, purchase orders, subscriptions, leases and commitments in accepted quotations. Record the parties, signing date, amount or obligation, conditions, payment evidence and follow-up required.

After the incorporation evidence arrives, check each item against the actual company name, date and constitution. The memorandum and articles bind the company and its members once registered. They also belong in the authority review, especially where a planned activity or commitment needs further approval.

For each contract, ask whether the company is bound under the applicable rule, whether clarification or another document is needed and which records must be handed to the person keeping the books. Obtain the counterparty's acknowledgement where the review requires it. Do not simply rename old PDFs.

Common pitfalls to remove from the pack

A name change during formation can leave a contract pointing to an entity different from the one incorporated. An unsigned quotation can be treated as unimportant even though acceptance emails contain the commercial commitment. A personal guarantee can remain in force after a company begins trading.

Another mistake is backdating. Keep the actual signing, payment and incorporation dates. A tidy-looking document with an invented date makes the history less reliable.

Finally, establish how customer money is held while formation is pending. A founder's personal account is not automatically an acceptable substitute for the intended company's arrangements. Payment-provider rules and customer expectations must be reviewed separately.

Prepare before the next request to sign

Take the draft document, subscriber details, proposed company name and current formation status to the person advising on the contract. Ask for a clear answer about party, authority, failure conditions and the required post-incorporation steps.

Review the company formation service for the planned setup, and preserve the contract questions as part of that planning. Getting a company number later is not a reason to leave today's commitment unclear.

Questions about contracts during formation