INDIAN COMPANIES ACT, 1956
BBM 501 – CORPORATE LAW
* Promoter – Person who does the necessary preliminary work incidental to the formation of the company, undertakes to do all the incidental work necessary to bring the company into existence * The first persons to control the company’s affairs chronologically, as they conceive the idea for forming the company with an objective, provide the company with share or loan capital and acquire the business or property of company * After finishing the formalities, they handover control to directors (Often promoters under a different name) * Term of business and not of law, used to designate those who set in motion the machinery to create an incorporated company
FUNCTIONS OF A PROMOTER
* Decides the name of the company and ascertains that name will be accepted by RoC * Settles the details of the company’s MoA and AoA, nomination of directors, solicitors, bankers, auditors and secretary as well as the registered office of the company * Arranges for printing of MoA and AoA, registration of the company, issue of prospectus, where necessary * Responsible for bringing the company into existence
* Legal status – Statutory provisions are silent, except for certain sections in Specific Relief Act, 1963 * Quasi – trustee - Promoter is neither an agent(as principal not in existence) nor a trustee(trust not in existence) of the company but has certain fiduciary duties under Companies Act. He is a quasi – trustee of the company FIDUCIARY POSITION OF PROMOTER
* Promoter stands in fiduciary relation to the company he promotes, as indicated below: 1. Not to make any profit at the expense of the company, directly or indirectly. If this rule is violated, company may compel him to account for the same 2. To give benefit of negotiations or contracts to the company. When he purchases any property for the company, he cannot rightfully sell the property to the company...
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