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B.LAW UNIT - V
B.COM III YEAR NOTES FOR COMPUTERS, HONORS AND GENERALS BUSINESS LAW NOTES
From MITESHKADAKIA
I. Promotion
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Refers to the entire process by which a company is broughtinto existence. It starts with the conceptualisation of thebirth a company and determination of the purpose forwhich it is to be formed.
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The persons who conceive the company and invest theinitial funds are known as the promoters of the company.
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The promoters enter into preliminary contracts withvendors and make arrangements for the preparation,advertisement and the circulation of prospectus andplacement of capital.
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However, a person who merely acts in his professionalcapacity on behalf of the promoter (eg lawyer, CA, etc) fordrawing up the agreement or other documents or preparesthe figures on behalf of the promoter and who is paid bythe promoter is not a promoter.
Duties of Promoter
1.He must not make any secret profit out of thepromotion of the company. Secret profit is madeby entering into a transaction on his own behalf and then sell to concerned property to thecompany at a profit without making disclosure of the profit to the company or its members. Thepromoter can make profits in his dealings withthe company provided he discloses these profitsto the company and its members. What is notpermitted is making secret profits i.e. makingprofits without disclosing them to the companyand its members.
2. He must make full disclosure to thecompany of all relevant factsincluding to any profit made by himin transaction with the company.
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2. Promotion & Formation of a Company
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