PROMOTER'

Promoter

Meaning

A promoter is a person who conceives, incorporates, and organizes a company. They undertake initial activities like preparing documents, arranging capital, and registering the company.

Legal Provisions under Companies Act, 2013

• Section 2(69): Defines a promoter as someone who takes the initiative in forming a company or controls its affairs before incorporation.
  
  

• Section 7(4): Requires promoters’ names and details to be submitted during company registration.
  
  

• Section 35: Makes promoters liable for misstatements in the prospectus.
  
  

Duties of a Promoter

1. Act in Good Faith – Must not make secret profits.
   
   

2. Disclose Personal Interest – Any conflict of interest must be disclosed.
   
   

3. Liability for Misstatements – If false information is provided in the prospectus, promoters are held responsible.
   
   

Indian Case Law: Erlanger v. New Sombrero Phosphate Co. (1878)

• A promoter sold property to the company at an inflated price without disclosure.
  
  

• The court ruled that the promoter has a fiduciary duty and must act in the company’s best interest.