Beruflich Dokumente
Kultur Dokumente
PART I - PROMOTERS
COMPANY LAW
CS EXECUTIVE PROGRAMME
CS NEERAJ VASUDEVAN
Promotion and formation of Companies
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Incorporation of Companies
Promoters
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Fiduciary – An individual in whom another has placed the utmost trust and confidence to
manage and protect property or money. It is derived from the Latin word FIDUCIA
meaning TRUST. Eg : Attorney, Broker, Guardian etc
Section 2 (69) of the Companies Act, 2013 defines the term ‘promoter’ as
under:-
“Promoter” means a person—
(b) who has control over the affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise; or
Provided that sub-clause (c) shall not apply to a person who is acting
merely in a professional capacity. By virtue of above definition, persons
in accordance with whose advice, directions or instructions the Board of
Directors of the company is accustomed to act are also treated as
promoters. However, if a person is merely acting in a professional
capacity i.e. giving only professional advice to the Board of directors, he
shall not be treated as a promoter.
Duties :
KNOWLEDGE + CONSENT
2) Promoters are not allowed to derive a profit from the sale of his
own property to the Company unless all material facts are
disclosed.
DISCLOSURE
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b) Where the promoter resells property to the company at an
increased price, the property which he purchased after he has
commenced to act in the capacity of a promoter, he cannot retain
the profit which he has not disclosed to the company.
(a) rescind the contract and if he has made a profit on some ancillary
transaction that may also be recovered; or
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(b) retain the property, paying no more for it than what the promoter has
paid, depriving him of his profit; or
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(c) where the above remedies would be inappropriate, such as when the
property has been altered so as to render recession impossible and the
promoter has already received his inflated price, the company may sue
him for misfeasance (breach of duty to disclose). The measure of
damages will be the difference between the market value of the property
and the contract price.
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Promoters’ duties under Indian Contract Act, 1872
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Rights of Promoters
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Right to receive
Right to recover Preliminary Expenses.
proportionate amount A promoter has no legal right
from the Co-promoters to claim promotional
expenses for his services
The promoters are held unless there is a valid
jointly and severally liable contract.
for the secret profits made by Without such a contract he is
them in the formation of a not even entitled to recover
company. Therefore if the his preliminary expenses
entire amount of secret The promoters are entitled to
profits is paid to the receive all the expenses
company by a single incurred for in setting up and
promoter, he is registering the company,
entitled to recover the from Board of Directors. The
proportionate amount from articles will have provision
co-promoters. Likewise, if for payment of preliminary
the entire liability arising out expenses to the
of mis-statement in the promoters.
prospectus is borne by one of
the promoters; he is entitled
to recover proportionately
from the co-promoters.
Remuneration of Promoters
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1) The Promoter sells his own properties to the Company for cash or
fully paid up shares at profit, provided that he makes full
disclosures to that effect.
2) He has the option to buy certain number of shares of the Company
at par.
3) He may be given the commission on the shares sold.
4) The Promoters may be given lump sum amount by the Company.