What do You means by Company Promotor
The person who makes preliminary plan to give a functioning form to the acquisition of requisite sources for establishing a company and gets that company a legal entity, that person is called as a promotor of that company.
Only one person can be the promotor of company and more than one person can also be promotors of the company. It mean that promotor indicates such persons who start that procedure by which the Companies Act enables them to establish an incorporated company.
Justice C. Cockburn has expressed his views regarding the promoters in the suit of Twycross v/s Grant, 1877, The promotors start a company after establishing it on the basis of a firm and fixed object and for fulfillment of that object take necessary action.
Lord Justice Bowen has expressed his views in the suit of Whaley Bridge Printing Company v/s Green, 1879, “The term ‘promotor’ is not a term of law but of business usually summing up in a single word a number of business operations familiar to the commercial world by which a company is generally, brought into existence.”
Lord-Blaekburn has said in respect of the promotors in the suit of Enlarger v/s Newbero Phosphate Company, 1878, “The word ‘promotor’ is a short and convenient way of designating those who set in motion the machinery by which the Act enables then; to create an incorporated company.”
● Functions of promotors
Following are the functions of promoters-
1.To manage sources and money etc. for the plan of forming a company and to take proper action for its.
2.Selection of capable individuals for appointment of directors.
3.If there is a planning for establishing a company by purchasing an existing business then discussion in this matter and timely selling with the dealers/sellers.
4.Decision regarding the name, working-place and area and objects of the company and to make undertaking contract as required.
5.Preparation of outline of memorandum and articles of the company.
6.To manage bankers, auditors, brokers and legal advisors etc.
7.After getting the company incorporated by the istrar, obtaining requisite certificate in this regard.
8.Preparation of company prospectus and presenting vertisement it in the office of the registrar and to manage its ad-
(9)Managing incorporation of capital.
(10) Obtaining certificate of business-commencement for
(11) Payment of preliminary expenditures.
Rights of promotor
The promotors are having the following rights-
(1) Right of taking Preliminary Expenditure-
The promotors are having this right that whatever proper expenditure they are doing for the establishment of companyand commencement of its business, they recover that expenditure from the company. For recovery of these expenditures such certificates are to be produced by the promotors by which the expenditures can be confirmed. Factually the payment of these expenditures mostly depend on the directors. On forming up of a company various expenditures can be paid to the promotors by the company. The promotors cannot obtain any amount from the company until the company is not established.
(2) Right of obtaining proportional amount from the Co-promotors- If any promotor out of the co-promotors has to indemnify on the basis of false statement in the tus of the company then that promotor can obtain the proprospecportional amount from the co-promotors. It is worth mentioning that even for secret profits made by the promotors, the promotors are held responsible personally or jointly.
Therefore if the amount of these profits is to be paid by one promotor then he can recover it proportionally from other promotors.
(3) Right of Remuneration – The promotors work hard in forming and running of a company. For this the different companies pay them their remuneration in different ways, e.g., commission, business profit and as a lumpsum amount.
Liabilities of Promotors
The following are the important liabilities of the promoters-
(1) Liability to Disclose Secret Profits and to Surrender it- After establishment of the company, if the promotors have earned a secret profit on the side of the company then they shall have to give its accounts to the company and all of these shall have to be given back to thecompany.
(2) Liability for the loss to the company from his undisclosed property purchasing-If the promotors purchase a property without giving complete information to the company, which causes loss to the company, then the company can lodge suit against them for these losses and the promotors shall be held responsible for these losses.
(3) Liability for the pre-contracts, he promotors-Whatever contracts are made with the promotor on the side of the company, for these contracts the promotor is held responsible till these contracts are completed.
(4) Liability for mis-statements in Prospectus- The promotors, who participate in the incorporation of the prospectus, are held responsible for mis-statements for the shareholders.
(5) Liability after Death – In the event of death of a promotor, his property is liable to the company for the amount
due upon him for payment.
(6) Liability after being Insolvent- If the promotor becomes insolvent then under such circumstances also, his property is liable to the company.
(7) Liability for fraud or the breach of fiduciary duties – If the company has suffered a loss due to fraud or breach of fiduciary duties by the promotors then the promotors shall be held responsible to fulfil that loss.
(8) Liability for committed fraud, when reported by Liquidator- When order for liquidation of the company is given by the court and the liquidator has given regarding the aspect to the court under this Act that a fraud is played by a promotor in promoting or forming of the company, then the court can give this order after considering this report that the defaulter promotor must be publicly examined in the court on the fixed date. In such position, the promotor is held responsible.
(9) Liability for legal material misrepresented in the Prospectus – If the shareholders of the company have to suffer loss for this reason that there were legal misrepresentations in the prospectus and for these misrepresentations the prombtors were defaulters, then the promotors shall be held responsible for the loss.
(10) Liability for public examination by the court during winding-up of the Company- If it comes to light during winding-up of the company that the promotors have misused any amount or property of the company, then the court can give this order on the application of the Govt. liquidator, creditor or contributor that the promotors shall be responsible for all those amounts or properties of thecompany.