Meaning
Transferring intellectual property or contractual rights created prior to legal entity creation commits early work product to a prospective corporate entity. A preincorporation assignment binds founders to assign inventions and software code to the company once legal incorporation completes. Because an unformed entity lacks legal capacity to contract, this agreement acts as an executory contract that requires corporate adoption or ratification post-formation.
The instrument ceases to govern once the newly formed entity executes a formal ratification agreement or adopts the contract through corporate resolution.
Temporal Gap
Inventions created before formal corporate registration exist in a legal vacuum regarding business ownership. Founders who build technology prior to filing articles of incorporation retain individual title unless a valid preincorporation assignment exists. Without prompt adoption by the newly formed board of directors, early assets remain personal property subject to individual creditor claims or marital property divisions.
Ratification Requirement
Post-incorporation board consent validates pre-entity agreements and creates enforceable corporate rights. The board of directors must formally approve the pre-existing transfer agreements during initial organizational meetings. Upon express adoption, the company assumes contract rights and liabilities backdated to the effective date specified in the original transfer agreement.
Liability Exposure
Personal liability remains with individual signers until the corporate entity explicitly assumes all underlying obligations.
