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Review Your SQE 1 Practice Records

Examination Timing: 00H01M44S

Your client, Mark, wants to incorporate a private company for his consulting business. 

Which of the following best describes the legal position? 

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Your selected option: C

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A company cannot begin to trade until it has a certificate of incorporation. However, it often happens in practice that an entrepreneur will commence trading pending the issue of the certificate of registration. It would be incorrect to commence such trading under any pretence that the company has already been incorporated, but this would not necessarily be fraudulent. Personal liability may be incurred if trading commences before the company is legally recognised. 

Key Point: The issuance of a certificate of incorporation is a crucial step in the formation of a company, legally allowing it to commence trading. Entrepreneurs must be cautious not to engage in business activities as a company before this certificate is obtained to avoid personal liability.

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