PROMOTERS
The promoter is not a term of art, or of law but a term of business. A Promoter is a person who brings about the incorporation of a company. He brings together the subscribers of the memorandum, gets MOA and AOA prepared, executed registered, finds the bankers, brokers, legal advisors, enters into preliminary contracts with vendors, agreements with underwriters and makes arrangements for preparation, advertisement & circulation of the prospectus and placement of the capital. In the companies act, a promoter has been named as a person who been named as such in the prospectus and has been identified in the annual returns and who has control over the company either directly or indirectly, as a shareholder or director etc. this is defined under section 2(69) of the companies act. The status of a promoter generally gets terminated when the BOD is formed and the control of the Co is transferred to them. Often the promoters continue as directors when the company is incorporated.
In the following cases, promoter definition has been given a wider scope through judicial interpretation of the term.
Twycross v. grant- promoter is one who undertakes to form a company with reference to a given project to set it going & who takes necessary steps to accomplish that purpose. It continues usually till the BOD is formed and takes charge. Jacobus Marles estate v. marler The advantage of having a flexible definition is that only those who would be subjected to the strict duties of a promoter will have the definition upon them. Whaley Bridge Printing Co v. Green-the promoter is a term not of law but of business, can be summarized as the promotion-a number of business operations familiar to the commercial world by which a Co is brought into existence. Lagunas Nitrate Co. v. Lagunas Syndicate to be a promoter one need not necessarily be associated with the initial formation of the Co. One who subsequently helps to arrange to float of its capital will equally be regarded as a promoter. Emma silver line mining co. v. lewis It was held that a whether a person can be termed as a promoter or not depends of the question of fact in each case and hence is depending on the circumstances of each case. CIT v.Bijili Cotton Mills Ltd Fiduciary relationship-starts from the day of the work of floating the company Lidney & Wigpool Iron Ore Co. v. Bird They have in their hands the creation & moulding of the Co.
Professional capacity A person acting in his/her professional capacity is not a promoter. For example, an advocate, preparing documents for the promoter cannot be termed himself as a promoter, similarly, an accountant taking care of the financial aspects under the scope of his employment, is not a promoter but is merely doing it in his/her professional capacity as a requirement to their occupation. In the case, In Re: Great wheal polgooth company ltd, it was held that an agent of a promoter is not to be regarded as a promoter himself.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
