ⓘ Corporate promoter


ⓘ Corporate promoter

A corporate promoter is a firm or person who does the preliminary work incidental to the formation of a company, including its promotion, incorporation, and flotation, and solicits people to invest money in the company, usually when it is being formed. An investment banker, an underwriter, or a stock promoter may, wholly or in part, perform the role of a promoter. Promoters generally owe a duty of utmost good faith, so as to not mislead any potential investors, and disclose all material facts about the companys business.


1. Fiduciary duties

Generally, promoters are in a fiduciary relationship with the company and its investors and shareholders, and must avoid conflicts of interests and exercise reasonable care in performing their duties. They must refrain from self-dealing or other types of abuse to take advantage of their position as a promoter. Self-dealing occurs, for example, when a promoter unfairly profits from the conduct of business with the company by charging higher prices for the goods they sell to the company than it would otherwise pay.

A promoter can be a shareholder in the promoted company. If the promoter is the only shareholder, the company may, in compliance with the rule of the United States Securities and Exchange Commission SEC and similar rules in other jurisdictions, need to disclose the information prior to selling shares to the public.

The fiduciary duties of promoters include:

  • to make full disclosure to the company of all relevant facts, including any profit made by them in transactions with the company.
  • not to make any secret profit out of the promotion of the company. Secret profit is made by entering into a transaction on their own behalf and then selling the concerned property to the company at a profit, without disclosing the profit to the company or its members. Promoters can make profits in dealings with the company, provided they discloses these profits to the company and its members.

If a promoter fails to disclose the profits, made by him in the course of promotion or he knowingly makes a false statement in the prospectus, whereby the person relying on that statement, makes a loss, he will be liable to make good the loss, suffered by that other person. The promoter is liable for untrue statements, made in the prospectus.

A person, who subscribes for any shares or debenture in a company on the faith of the untrue statement contained in the prospectus, can sue the promoter for the loss or damages, sustained by the subscriber as the result of such untrue statement.


2. Types of promoters

There are three types of Promoters:-

Occasional promoters

These promoters take interest in floating some companies. They are not engaged in promotion work on a regular basis. They take up the promotion of some company and once it is over they resume their original profession. For instance, engineers, lawyers etc. may float some companies.

Entrepreneur promoters

They are both promoters and entrepreneurs. They conceive the idea of a new business unit, do the groundwork to establish it and may subsequently become a part of the management.

Financial promoters

Some financial institutions, like investment banks or industrial banks, may take up the promotion of a company with a view to finding opportunities for investment.


3. Functions of promoters

The functions of a promoter may include:

Naming a company

The promotor has to select a name of the company while selecting the name the promotor keeps in mind that the name should not be identical to the name of any other company.


3.1. Functions of promoters Discovery of a business idea

The first stage in company promotion is the generation of new ideas. It is the promoter who conceives the idea of setting up a business, and makes an assessment of the viability of a particular aspects business be it technical feasibility, financial feasibility, economic feasibility and also incorporation of company.


3.2. Functions of promoters Detailed investigation

Promoters undertakes a detailed investigation of the viability, profitability and future prospects of the growth of the proposed activity, and may seek the help of specialists such as lawyers, accountants, cost accountants, a company secretary, and engineers. Organisations engaged in market research and other specialised agencies. Specialists are in a position to make an objective analysis of their own areas which may help the promoters. Decisions have to be taken regarding the size, location, layout, manpower etc.


3.3. Functions of promoters Entering into preliminary contracts

The promoter may enter into contracts with third parties in anticipation of the registration of a company; but after registration, the company must approve or confirm these contracts.


3.4. Functions of promoters Naming a company

The promotor has to select a name of the company while selecting the name the promotor keeps in mind that the name should not be identical to the name of any other company.

  • David Higgins born 13 December 1979 is a New Zealand boxing promoter boxing manager and event manager under his company, Duco Events. Higgins has promoted
  • Bhubaneswar Corporate office in Kolkata and Branch Offices across India with a reputed Board of Directors, experienced and professional Promoters and Management
  • Non - Executive Chairman is a promoter of the Company or related to the promoters of the company. At the end of the first India Corporate Week in December 2009
  • New Zealand entrepreneur David Higgins. The company mostly promotes corporate events like celebrity dinners, charity balls and galas, as well as sporting
  • civil and criminal tools to put tax fraud promoters out of business Enforcing IRS summonses for records of corporate tax shelters Attacking the use of foreign
  • with the corporate governance guidelines including fit and proper criteria for directors as issued by RBI from time to time. If a promoter setting up
  • Portfolio Investors, Financial Institutions and corporate bodies. Syndicate Bank is the largest non - promoter investor in the Company with 13.99 shareholding
  • informs the working groups as well as the corporate groups. Participation in the Expert Groups is restricted to Promoter members and Associate members. The working
  • sometimes aggregated into a voting trust to facilitate a corporate reorganisation. Promoters of companies sometimes aggregate their shares in a voting
  • and Brighton, and is the longest - established of the so - called Big Four promoters at the Edinburgh Festival Fringe in August. Year - round audience numbers

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