Answer in brief write a note on role of promoter
Answers
Answer:
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Explanation:
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 company's business.[1]
Fiduciary duties Edit
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.[citation needed] 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:
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.
to make full disclosure to the company of all relevant facts, including any profit made by them in transactions with the company.
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.
Answer:
A promoter is an individual or organization that helps raise money for some type of investment activity. Promoters may raise money for a company by offering investment vehicles other than traditional stocks and bonds, such as limited partnerships and direct investment activities.