A promotr is a person who does the necessary preliminary work incident alto the formation of a company.It is a compendious term used fora person who undertakes,does and goes , keeping in view the object, to bring into existence an incorporated company. Chronologically, the first persons who control a company’s affairs are its promoters

Section 2(69) of the Companies Act, 2013 defines the term ‘promoter’ as under:-
“Promoter” means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual return
referred to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is
accustomed to act.

It was held in Twycross v. Grant, (1877) 2. C.P.D. 469 that promoter is “one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose”.

Functions

1. The promoter of a company decides its name and ascertains that it will cbe accepted by the Registrar of Companies.

2. He settles the details of the company’s Memorandum and Articles, the nominations of directors,solicitors,bankers,auditors and secretary and the registered office of the company.

3. He arranges for the printing of the Memorandum and Articles, the registration of the company ,the issue of prospect us ,where a publishable is necessary.

Categories of Company Promoter

A promoter is the one who decides an idea for creating a particular business at a given place and carries out a range of formalities required for starting a business. 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. Regrettably, such promoters are very inadequate in the developing countries.

They have played a significant role in many countries and aided the business community to a great extent. In U.K. the issue houses, in U.S. investment banks and in Germany.

• Joint Stock Banks have enacted the role of promoters very appreciably and effectively.
• Occasional promoters are those whose most important interest is the floating of companies. They are not in promotion work on standard basis but take up promotion of some companies and then go to their former profession. For example, engineers, lawyers etc. may perhaps float some companies.
• Financial promoters perform the task of promoting the financial institutions. They usually take up this work when financial environment is constructive at the time. Managing promoters played an important role in promoting new companies and then got their managing agency rights.

A promoter is neither an agent nor a trustee of the company as it is a non-entity before incorporation. Some legal cases have attempted to spell out the standing of promoters.

Fiduciary position

1. Not to make any profit at the expense of the company -the promoter must not make, either directly or indirectly, any profit at the expense of the company which is being promoted. If any secret profit is made in violation of this rule,the company may, on discovering it, compel him to account for and surrender such profit.

2. To give benefit of negotiations to the company – the promoter must, when once he has begun to act in the promotion of a company, give to the company the benefit of any negotiations or contracts into which he enters in respect of the company. Thus where he purchases some property for the company,he cannot rightfully sell that property to the company at a price higher than he have for it. If he does so, the company may, on discovering it,rescind the contract and recover the purchase money.

3. To make a full disclosure of interest or profit -if the promoter fails to make a full disclosure of all the relevant facts, including any profit and his personal interest I a transaction with the company,the company may sue him for damages for breach of his fiduciary duty and recover from him any secret profit made even though rescission is not asked or is impossible.

4. Not to make unfair use of position -the promoter must not make an unfair or take care to avoid any unreasonable use of his position and must take care to avoid anything which has the appearance of undue influence or fraud Further, a promoter cannot relive himself of his liability by making provisions to that effect in the Articles of the company.

5. Duty of promoter as regards prospectus -the promoter must see, connection with the prospectus, if any is issued, that the prospectus –

(a) contains the necessary particulars

(b) does not contain any untrue or misleading statements or does not omit any

Liabilities

Remuneration:

A promoter has no right to get compensation from the company for his services inpromotingthecompanyunlessthereisacontacttothateffect.Inpractice,a promoter takes remuneration for his services in one of the following ways-

1. he my sell his own property at a profit to the company for cash or fully- paid shares provided he makes a disclosure to this effect

2. He may be given an option to buy a certain number of shares in the company at par.

3. He may take a commission on the shares sold

4. He may be paid a lump sum by the company.

Conclusion

A promoter is the one who decides an idea for creating a particular business at a given place and carries out a range of formalities required for starting a business. 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.