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PROMOTION

Promotion is the first stage in the formation of a company.

PROMOTER: Is one who identifies a business opportunity,


analyses its prospectus and take steps to implement it
through formation, normally becomes Directors. He is not an
agent since there is no principal, not a trustee since there
is no trust.
A person who acts only in a professional
capacity is not a promoter.

FUNCTIONS OF A PROMOTER:
1) To conceive the idea,
2) To make detailed investigation,
3) To organize the resources,
4) To obtain the consent of persons willing to act as first
directors,
5) To decide the name of the company,
6) To get the necessary documents prepared,
7) To file the necessary documents with ROC.

LEGAL STATUS & POSITION OF


PROMOTERS

Quasi trustee.
Fiduciary Position:

Not to make any profit at the cost of the Co.,


to give benefit of contract to Co.,
to make full disclosure of profit or interest,
not to make unfair use of position
no right to claim for remuneration unless there
is a contract.

PRE INCORPORATION & PROVISIONAL


CONTRACTS
PRE INCORPORATION OR PRELIMINARY CONTRACTS :
Contracts entered into before the incorporation of Company :
Co. is NOT bound by it. Company CANNOT enforce pre-in
corporation contracts, NO ratification, Promoters are
personally liable. After incorporation fresh contracts are
made in terms of old contracts. Specific performance may be
obtained provided the Co has accepted such contracts and
has also communicated it to the other party.
PROVISIONAL CONTRACTS: Contracts entered by Public Ltd
Co. after incorporation but before getting certificate of
commencement of business. All such contracts are
provisional and NOT binding on Co.
If it gets the certificate of comm. all such contracts become
binding. If the contract is oppressive or fraudulent company
can avoid it.

COMPANY FORMATION
PRELIMINARY STEPS: 2 or 7 or more persons - P Ltd or Public
Ltd, subscribe their names to MOA, for a lawful purpose.
Documents to be filed with ROC : MOA, AOA, agreement for
appointment of MD, list of directors, a declaration that all
legal requirements are met. Situation of Regd. office.
CERTIFICATE OF INCORPORATION: When all legal
requirements are met ROC will issue. Certificate is a
conclusive evidence of registration and it CANNOT be disputed
or challenged on any ground.
CASE LAW: JUBILEE COTTON MILLS LTD.
EFFECT OF REGISTRATION: It shall become a body
corporate, perpetual succession, a common seal, limited
liability for members, and a distinct legal entity.
CERTIFICATE OF COMMENCEMENT OF BUSINESS: A Public
Ltd Co. has to obtain this certificate before it can commence
the business.