Promotion is the process of discovering a business idea, investigating its feasibility and taking necessary steps to bring a company into existence. Promotion involves planning, arranging resources and completing initial formalities before incorporation.
A promoter is a person who undertakes to form a company and takes preliminary steps for its registration. A promoter conceives the idea, brings together resources and completes legal formalities.
Promoters stand in a fiduciary (trust) position towards the company. Their main duties are:
Access the complete note and unlock all topic-wise content
It's free and takes just 5 seconds
From this topic
Promoters conceive the business idea and conduct feasibility studies. They select company name and arrange initial finance and resources. They prepare and draft important documents like MOA and AOA and complete incorporation formalities. They also appoint directors, bankers, auditors and other professionals and may arrange contracts for property, machinery etc.
Promoters occupy a fiduciary position and must act in good faith for the company. They must make full disclosure of material facts and must not make secret profits; undisclosed profits can be recovered by the company. Promoters can be liable for breach of duty, fraud or concealment and may also incur civil/criminal liability for misstatements in prospectus as per law.
Business organization, an entity formed for the purpose of carrying on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation.
Download this note as PDF at no cost
If any AD appears on download click please wait for 30sec till it gets completed and then close it, you will be redirected to pdf/ppt notes page.
Promotion is the process of discovering a business idea, investigating its feasibility and taking necessary steps to bring a company into existence. Promotion involves planning, arranging resources and completing initial formalities before incorporation.
A promoter is a person who undertakes to form a company and takes preliminary steps for its registration. A promoter conceives the idea, brings together resources and completes legal formalities.
Promoters stand in a fiduciary (trust) position towards the company. Their main duties are:
Liabilities of promoters (brief):
Incorporation means the legal process by which a company is created and becomes a separate legal entity. After incorporation, the company can enter into contracts, own property and sue or be sued in its own name.
Common steps (overview level):
MOA is the charter of the company. It defines the company’s relationship with the outside world and lays down the fundamental conditions upon which the company is allowed to operate. It states the scope and objectives of the company; acts beyond MOA are generally ultra vires (beyond powers).
AOA contains the internal rules and regulations for management of the company. It governs relations between company and members and among members themselves. It provides how the company will be managed.
Certificate of Incorporation is issued by the Registrar after registration. It is conclusive evidence that the company has been formed and is legally in existence from the date mentioned. After incorporation, the company becomes a separate legal entity and can start operations (subject to any additional legal requirements, if applicable).
If these notes helped you, a quick review supports the project and helps more students find it.
A promoter is a person who undertakes to form a company and performs the preliminary work required to bring the company into existence. Promoters conceive the idea of business, arrange resources and complete legal formalities for incorporation.
Functions of promoters: Promoters identify business opportunity and conduct feasibility studies (technical, financial and market). They select company name and place of registered office. They draft and arrange for preparation of important documents like Memorandum of Association and Articles of Association. They negotiate and enter preliminary contracts for property, machinery and services and arrange initial finance. They also appoint directors, bankers, auditors and legal advisers and may prepare prospectus if required.
Duties of promoters: Promoters occupy a fiduciary position towards the company. They must act in good faith and in the best interest of the company. They must make full disclosure of all material facts and must not make secret profits. They should avoid conflict of interest and should not misuse their position.
Liabilities: If promoters make secret profit without disclosure, the company can recover such profit. Promoters are liable for breach of duty, fraud or concealment of material facts. They may also be liable for misstatements in prospectus which can create civil and criminal liability under law.
Thus promoters play an important role in formation of company but are bound by strict duties and liabilities.