promotors plays an important role in the formation of company explain
Answers
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A promoter plays a very important role in the formation of a company. ... To originate the scheme for formation of the company:
Promoters are generally the first persons who conceive the idea of business.
They carry out the necessary investigation to find out whether the formation of a company is possible and profitable.
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Answer:
Explanation:
The individual will then be described as ‘promoter’ of the company. In the 19th century, when industrial revolution came and companies flourished, the concept of promoter gained substantial importance like no other occupation, as there were no restrictions on advertising immediately to the public, inviting them to take shares in new companies, some promoters took advantage of their position and of public sympathy and hence defrauded the public on large extent. The role of promoter in establishing a company changed substantially in the 20th century.When, in later years people refused to buy shares in newly incorporated companies, because of their established gullible image and hence hesitated to invest in companies which had no trading history and so disreputable company promoter statured to vanish. With the evolution of stock exchange and the role of susceptible promoters gone, what eventually happened was the profusion of promoters around the globe to start over a company and enhance theirs and other associates economic conditions enhance? Judging for theirhistorical role, it’s clear that,Company promoters play an indispensable role in the formation of a company. A company is born only when it is duly incorporated. For incorporating a company various documents are to be prepared and other formalities are to be complied with. All this work is done by promoters. Gerstenberg has defined promotion as the discovery of businessopportunities and the subsequent, organization of fun and property and managerialability into a business concern for the purpose of making profits therefrom. After the idea is conceived, what promoter does is to make detailed investigations to find out the weaknesses and strong points of the idea, determine the amount of capital required and estimate the operating expenses and probable income. On being satisfied about the economic viability of the idea, the promoters take all the necessary steps for incorporating the company and start changing people’s lives.
A promoter is not forbidden to make profit but to make secret profit . He may make a profit out of promotion with the consent of the company, in the same way as an agent may retain a profit obtained through his agency with his principal’s agent.The challenging job is to discover who may give the necessary consent on behalf of the company. If the company has been established with a board of directors which is independent of the promoters, the consent may be given by the board , but the if the directors under the influence of the promoters, it is not sufficient for the board to give its consent to the promoters obtaining a profit from the promotion of the company [16] and the promoter must obtain the consent of the persons who provide the company with its initial share capital [17] , either by such persons who give their individual consents, or by them approving the retention of the promoter’s profit by passing an ordinary resolution to that effect at a general meeting. Consent of the retention of profit must some either from the directors or from the shareholders, if the promoter makes discloser of how profit he has made or going to make, and it is insufficient for him to give them information from which they could have deduced that he has made profits. If the company issues a prospectus, disclosure to shareholders may be made in it, and each shareholders subscription for shares on the basis of the prospectus would then be deemed to indicate his consent to the retention of profit disclosed by promoters. Thus, the promoters have to ensure that the real truth is disclosed to those, who are induced by the promoters to join the company [18] .
The Job of promoter is not only limited towards, performing certain duties, but surely it extends toward the incorporation of a company. It depends on the nature of the company which is to be established, to arrange their respective persons. More evidence can be found in the Companies act section 12 which states that“Any seven or more persons or where the company to be formed will be a party company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this act in respect of registration form an incorporated company with or without limited liability [19] “. Thus the promoters have to get together at least seven persons in the case of public company and two persons in case of private to subscribe to memorandum of association. Following are the functions of promoter in an elaborate manner.