Chapter: 4 Promoter of a Company: Role, Rights and Liabilities

Promoter of a Company: Role, Rights and Liabilities

Introduction
A Promoter is a person who performs the necessary preliminary work incidental to the formation of company. He performs all necessary and incidental preliminaries required for incorporation of a company, provides it with share and loan capital and acquire the business or property for the Company. When these things have been done, they hand over the control of the company to its directors, who are often the Promoters themselves, under a different name.

Functions of Promoter

Promoter of a company:
1.    decides its name of the company to be incorporated.
2.    formulates and finalises company's memorandum of association and articles of association
3.    decides upon the nomination of directors, solicitors, bankers, auditors, and secretary, and register office of the company.
4.    arranges for the printing of memorandum of association and articles of association, the registration of the company, the issue of prospectus where a public issue is necessary.

He is in fact, responsible for brining the company into existence for the object which he has in view.

Legal status of promoter

Quasi Trustee: Promoter is neither an agent nor a trustee of the company but certain fiduciary duties have been imposed on him under the Companies Act 1956. He is not an agent because there is no principal born by that time and he is not a e because there is no trust in existence. Hence he occupies the peculiar position of Quasi Trustee.

Fiduciary Position of Promoter: A Promoter stands in a fiduciary position (i.e. relationship reacquiring confidence/trust), to the company which he promotes. In equity, the Promoter of a company stands in a fiduciary relation to it.