The person who makes the initial plan to give an methodology to the acquisition of sources required to establish the company and receives that company a legal unit is called the person as the promoter of that company.
Only one person can be the company’s promoter and more than one person can be the company’s promoter. This means that the promoter indicates individuals who start the process by which the Company Act enables them to set up a corporate company.
Justice C. Cockburn has expressed his thoughts about promoters in the twitcross v/s Grant, 1877 suit, promoters start a company after setting it up on the basis of a firm and fixed object and taking the action necessary to fulfill that object.
Lord Justice Bowen has expressed his thoughts in the suit of Whale Bridge Printing Company vs Green, the 1879 suit, the term ‘promoter’ is not the word of law, but the business usually briefs in many business operations familiar with the commercial world in the same word by which a company is generally brought into existence.
Lord-Bleckburn has said in relation to promoters in the Anlarger V/S Newbero Phosphate company, the 1878 suit, the term ‘promoter’ is a small and convenient way to designate those who set the machinery in speed by which the act enables; to form a incorporated company.
● Work of promoters.
The functions of promoters are following:
Act.
1. Managing sources and money etc. to plan the formation of a company and take proper action for it.
2. Selection of persons enabled to appoint Directors.
3. Discuss in this case if the company is planned to be founded by buying an existing business and make sale in time with dealers/venders.
4. To make decisions and contracts as required about the company name, workplace and area and goods.
6. Managing bankers, auditors, brokers and legal advisers etc.
7. After receiving the required certificate in this regard, after receiving the company incorporated by Istrar.
8. Preparation of the Company Prospectus and submitting its vertical into the Registrar’s office and managing its ad-
(9) incorporating capital.
(10) obtaining business-version certificate for
company.
(11) Payment of initial expenses.
promoter’s rights
Promoters have the following rights-
(1) Right to take initial expenses-
Promoters have the right to whatever reasonable they are spending to establish the company and at the start of its business, they fix that expense from the company. For the recovery of these expenses there are to be produced by certificate promoters by which expenses can be confirmed. In fact, the payment of these expenses depends on most directors. Various expenses on the formation of the company can be paid to promoters by the company. Promoters can’t receive any amount from the company until the company is established.
(2) The right to get the proportional amount from co-promoters – If any of the promoters must compensate on the basis of a false statement in the company’s tus, he may receive propocactional amount from promoters co-promoters. It is notable that even for the secret profits made by promoters, promoters are personally or jointly responsible.
So if the amount of these profits is to be paid by a promoter, he can fix it proportionally from other promoters.
(3) Right to remuneration – Promoters work hard in the formation and running of a company. For this, various companies pay them their remuneration in different ways, such as commission, business profit and lump-free amount.
liabilities of promoters.
Important liabilities of promoters are following:
(1) Liability to disclose and surrender secret profits- After the establishment of the company, if promoters have earned secret profit in favor of the company they must give the company their account and give all these back to the company.
(2) Liability to the company for damages from its unknown property purchase-if the promoters buy the property without giving full information to the company thereby damaging the company, the company may enter lawsuit against them for these damages and promoters shall be held responsible for these damages.
(3) Liability for pre-contracts, whatever contracts are made with the promoter in favor of the promoter-company, the promoter is held responsible for these contracts until these contracts are completed.
(4) Liability for mis-details in Prospectus- promoters, who participate in the inclusion of Prospectus, are held responsible for the incorrect statements for the shareholders.
(5) Liability after death – In the event of the death of a promoter, his property is liable to the company.
because of payment for him.
(6) Liability after bankruptcy- If the promoter becomes bankrupt then in such circumstances too, his property is liable to the company.
(7) Liability for violation of fraud or fiducery duties – If the company has suffered damages due to fraud or violation of fiducery duties by promoters then promoters shall be liable to fulfill that loss.
(8) Liability for committed fraud, when reported by a liquidator—when the company’s liquidation is ordered by the court and under this Act the court is given fluid regarding the aspect that fraud is played by a promotor in the promotion or formation of the company, the court may, after considering the report, the defaulter promotor should be made publicly investigated in the court on the date of fixed. In such a situation, the promoter is held responsible.
(9) Liability for the wrongly submitted legal content in Prospectus – If the company’s shareholders have to incur loss for the reason that Prospectus had legal incorrect representations and Promptors were defolters for these incorrect representations, promoters will be held responsible for damages.
(10) Liability for public examination by the court while curved of the company – If it comes to light that the promoters have abused any amount or property of the company, the court may place this order on the application of the Government. Liquids, transitors or contributors that the promoters will be responsible for all those volume or company’s qualities.