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Promoter
A promoter is someone who establishes a business entity and handles the initial organization and registration. They bring together the necessary people and resources, file required documents, and arrange initial funding. Promoters have fiduciary duties to act in good faith and not profit secretly. They are responsible for preliminary contracts and liable for misstatements in documents like the prospectus. For their efforts, promoters may receive compensation like fully paid shares, cash and shares, commissions, or a fixed payment as outlined in the company articles.
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Promoter
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- 2. Who is aPromoter? A Promoter is the one who puts together a business, for himself or on behalf of others and performs various formalities required for starting up that business. A promoter finds and bring together the subscribers, finds the banker, brokers and legal advisers, finds the first directors and makes arrangement for the advertisement and circulation of prospectus and arranges the capital. Promoter stands in a fiduciary relationship to the proposed company and must act in good faith in all their dealings. Usually the promoter is the principal shareholder or one of the management team and has a contract to claim for the shares of stock for his/her efforts in organization.
- 3. CharaCteristiCs • A promoterconceives an idea for setting up a business. • He makes primary investigations and insure about the future prospects of the business. • He analyse the profitability and feasibility of the idea. • He decides the name and location of the company and also the amount and form of its share capital. • He prepares the Memorandum of Association, Prospectus and other necessary documents and file them for incorporation.
- 4. Duty/LiabiLities A promotershould not make secret profits out of the dealings of the company. He must excise due diligence and care while performing the work as a promoter. He will be personally responsible for all the preliminary contracts made by him till all those are approved by the company. He is liable to pay compensation for misstatements in prospectus, for non-disclosure of any matter in the prospectus. He is liable for any untrue statement in the prospectus to a person who has subscribed for any shares or debentures or have invested in the business on the faith of the prospectus. Such a person may sue the promoter for compensation for any loss or damage sustained by him.
- 5. RemuneRations/RewaRds A promotermay be rewarded by the company for efforts undertaken by him in forming the company and services rendered by him. He may be given fully paid up shares in the company or partly in cash and partly in shares or debentures. The promoter may be paid commission on the shares sold. The promoter may make profits on transactions entered by him with the company. The Article of the company may provide for fixed sum to be paid by the company to the promoter.