Company Promoters and their Functions

The idea of carrying on a business which can be profitably undertaken is conceived either by a person or by a group of persons who are called promoters. The person or a group of persons who takes necessary steps to give birth to a company form of business organization are known as company promoters.  A promoter may be an individual, firm, association of persons or a company.

A company Promoter is a firm or person who does the groundwork work related to the structure of a company, including its promotion, incorporation, and flotation, and solicits people to invest money in the company, usually when it is being formed.

Company promoters conceive an idea of starting a joint-stock company and work upon it to develop the idea and finally form the joint-stock company. The persons who assist the promoter in completing various legal formalities are professional people like Counsels, Solicitors, Accountants, etc., and not promoters. In other words, company promoters are those who discover the opportunities to make money, investigate such proposition, assemble and finance them and thereby give a shape of a joint-stock company. Promoters generally owe a duty of utmost good faith, so as to not mislead any potential investors, and disclose all material facts about the company’s business.

Company promoters give not only birth to a joint-stock company but also nourish it till it stands on its own feet. It is the Promoter who undertakes does and goes through all the necessary & incidental requirements keeping in view the object of proposed company in order to bring to existence as such incorporated company.

Functions of Company Promoters – A promoter plays a very important role in the formation of a company.

  • To conceive an idea of forming a company and explore its possibilities.
  • Analyze profitability and feasibility of the idea.
  • To conduct the necessary negotiation for the purchase of business in case it is intended to purchase as existing business.
  • Investigate the workability of the idea by consulting experts.
  • To make arrangement for the preparation of prospectus, its filing, advertisement and issue of capital.
  • Decide the name and location of the company and also the amount and form of its share capital.
  • To arrange for the registration of company and obtain the certificate of incorporation.
  • Prepare the Memorandum of Association, Prospectus and other necessary documents and file them for incorporation.

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