Who is ‘promoter’? And explain its functions and legal position.

Promoter:

1. Definition:
A promoter is an individual or a group of individuals who take the initiative to form a company. They are responsible for conceiving the idea of the company, identifying the business opportunity, and taking the necessary steps to incorporate and establish the company.

2. Functions of a Promoter:

2.1 Idea Generation:

• Promoters are responsible for conceiving the idea of the company, which includes identifying a business opportunity or a market need that the company can address.

2.2 Business Planning:

• Promoters develop a detailed business plan that outlines the company's objectives, strategies, and operational plans. This plan serves as a roadmap for the company's future activities.

2.3 Capital Raising:

• Promoters are often involved in raising capital for the company, either through their own investments or by attracting external investors.

2.4 Legal Compliance:

• Promoters ensure that the company complies with all legal requirements for incorporation, such as preparing the memorandum and articles of association and filing necessary documents with the regulatory authorities.

2.5 Recruitment:

• Promoters may be involved in recruiting key personnel for the company, such as senior management and key employees.

2.6 Strategic Decision Making:

• Promoters play a key role in making strategic decisions for the company, such as determining the company's business model, target market, and growth strategy.

3. Legal Position of a Promoter:

3.1 Fiduciary Duty:

• Promoters owe a fiduciary duty to the company and its shareholders, which requires them to act in the best interests of the company and to avoid conflicts of interest.

3.2 Disclosure Requirements:

• Promoters are required to disclose any personal interest they have in transactions entered into by the company and to ensure that such transactions are conducted fairly.

3.3 Liability:

• Promoters may be held personally liable for any losses incurred by the company as a result of their actions or omissions, particularly if they have acted fraudulently or negligently.

3.4 Remuneration:

• Promoters are entitled to receive remuneration for their services, which may be in the form of a salary, commission, or shares in the company.

Conclusion:
Promoters play a crucial role in the formation and establishment of a company. They are responsible for conceiving the idea of the company, developing a business plan, raising capital, and ensuring compliance with legal requirements. Despite their significant contributions, promoters are also subject to legal obligations and potential liabilities to ensure transparency and fairness in their dealings with the company and its stakeholders.