Before the certificate of incorporation is issued, which statement is correct?

• A. The company is not a separate legal entity.
• B. The company is a fully formed legal entity.
• C. The company is legally binding on all pre-incorporation contracts.
• D. The company automatically becomes a legal entity at the signing.

Answer: (A)

The main idea here is when a company becomes a separate legal personality. Before the certificate of incorporation is issued, there isn’t a distinct legal person called the company yet. The people promoting the venture act as promoters and can enter into contracts on behalf of the proposed company. Since the company doesn’t exist as a separate entity at that stage, it cannot be bound as a party to those contracts; typically the promoters themselves are the ones who bear liability unless the contracts are later ratified or novated to the company once incorporation happens. That’s why the statement that the company is not a separate legal entity before incorporation is correct. The other options are not right because a) there isn’t a fully formed legal entity until incorporation, c) pre‑incorporation contracts generally bind the promoters rather than the non-existent company, unless later adopted, and d) the company does not become a legal entity merely at signing; formation occurs on registration.