Unit-5 Promoters:-

BY-
MS. SHIVANGI SINHA
ASSISTANT PROFESSOR
NEW LAW COLLEGE (BVDU), PUNE
 Outcome:-

 Definition
 Meaning
 Position
 Power
 Duties
 Definition:-

 According to section 2(69) of the Companies Act, 2013 the term ‘Promoter’ can

be defined as the following:
1. A person who has been named as such in a prospectus or is identified by the
company in the annual return in section 92; or
2. A person who has control over the affairs of the company, directly or indirectly
whether as a shareholder, director or otherwise; or
3. A person who is in agreement with whose advice, directions or instructions the
Board of Directors of the company is accustomed to act.
 Meaning:-

 A promoter is the one who decides an idea for setting up a particular

business at a given place and carries out a range of formalities required for
the setting up of a business. A promoter may perhaps be an individual, a firm,
and an association of persons or a company.
 The promoters may perhaps be professional, occasional, financial or
managing promoters.
 A professional promoter gives away the company to the shareholders when
the company starts.
 Position:-

 Legal status of promoter is concerned it is undefined. So, legal status of promoter

has not been determined and specified by the statute. His position is incapable of
being defined. He cannot considered as an agent, an employee and trustee of the
companies.
 The status of the promoter is generally terminated when the board of directors
has been formed and the board starts governing the company. Chronologically,
the first persons who control or influence the company, and it they who take the
necessary steps to incorporate it, to provide it with share and loan capital and
acquire the business or property which it is to manage. When these things are
done, they handover the control of the company to its directors, who are often
themselves under a different name.
 Power:-

• Promoters are generally the first persons who conceive the idea of business.
• They carry out the necessary investigation to find out whether the formation of a company is possible
and profitable.
• Thereafter they organize the resources to convert the idea into a reality by forming a company; or in
other words we can say that it is the promoter –
• who settles the name of the company thereby ascertain the name will be acceptable by the registered
of the office;
• who settles the content or details as to the Articles of the companies; (here, articles implies Articles of
association & Memorandum of association),
• who nominates the directors, bankers, auditors and etc.;
• who decides the place where registered office (head office) have to be situated;
• who prepare the Memorandum of Association, Prospectus and other necessary documents and file
them for incorporation.
 Duties:-

 The early companies Acts contained no provisions regarding the liabilities or duties of promoters, and even today
legislation is largely silent on the subject, merely imposing liability for untrue statement in listing particulars or
prospectuses to which they are parties.
 There are some duties or liabilities with respect to Promoter has been also provides by the statute: The promoters
have certain basic duties towards the company formed :-
• As we know that Promoters have been described to be in a fiduciary relationship (i.e., relationship of trust and
confidence) with the company. This relationship of trust and confidence requires the promoter to make a full
disclosure of all material facts relating to the formation of the company.
•  He must not make any secret profit out of the promotion of the company. Secret profit is made by entering into a
transaction on his own behalf and then sell to concerned property to the company at a profit without making
disclosure of the profit to the company or its members.
• The promoter can make profits in his dealings with the company provided he discloses these profits to the company
and its members. What is not permitted is making secret profits i.e. making profits without disclosing them to the
company and its members.
• He must make full disclosure to the company of all relevant facts including to any profit made by him in transaction
with the company.
Liabilities:-
Thank You..!!