Position of Promoters in India: A critical analysis

A Rough draft submitted in partial fulfilment of the course Corporate LAw I during
the Academic Session 2019-20, 7th Semester

SUBMITTED BY:

NAME: Aastha Singh Rajput

ROLL NO. 1502
BATCH: B.A. LLB
SUBMITTED TO: Ms. Nandita S. Jha

CHANAKYA NATIONAL LAW UNIVERSITY

Nyaya Nagar, Mithapur, Patna
INTRODUCTION

Promoters is a person who involves in the promotion the company. He is a person who does
all necessary preliminary work, incidental to the formation or promotion of the company. To
be a promoter one need not necessarily be associated with the initial formation of the
company; one who subsequently helps to arrange floating of its capital will equally be
regarded as a promoter.

The promoters occupy an important position and have wide powers relating to the formation
of a company. It is, however, interesting to note that so far as the legal position is concerned,
he is neither an agent nor a trustee of the proposed company. But it does not mean that the
promoter does not have any legal relationship with the proposed company. The promoters
stand in a fiduciary relation to the company they promote and to those persons, whom they
induce to become shareholders in it.

A promoter is subjected to liabilities under the various provisions of the Companies Act.
Under Section 26 of the Companies Act, 2013 lay down matters to be stated in a prospectus.
A promoter may be held liable for non-compliance of the provisions of the section. Under
section 34 and 35, a promoter may be held liable for any untrue statement in the prospectus to
a person who subscribes for shares or debentures in the faith of such prospectus. However,
the liability of the promoter in such a case shall be limited to the original allottee of shares
and would not extend to the subsequent allotters.

TENTATIVE CHAPTERISATION

1. Introduction
2. Concept of promoter
3. Functions of promoter
4. Pre-contractual and post contractual obligations
5. Position of promoter in India in relation to company
6. Conclusion
OBJECTIVE OF STUDY
 To analyze the Position of promoter in Companies Act, 1956.
 To analyze the Position of promoter in Companies Act, 2013.

HYPOTHESIS
 The promoter moulds and creates the company and under his supervision it
comes into existence.
 A promoter is neither an agent nor a trustee of the company because it is a non
entity before incorporation.
RESEARCH METHODOLOGY
 Researcher relied upon doctrinal method e.g. books, internet, journals etc
 Researcher mainly relied upon library based study.

SOURCE OF DATA COLLECTION

 PRIMARY SOURCE- provisions of statutes, precedents.
 SECONDARY SOURCE- websites, articles, books, journals etc.

SCOPE OF THE STUDY

Researcher’s work is wholly based on doctrinal method. This research will be useful for the
purpose of publication.

BIBLIOGRPAHY
1. A.K. Majumdar, Dr. G.K. Kapoor, ‘Taxman’s Company Law’, 16th ed.
2. Dr. Avtar Singh, Company Law, 17th ed.
3. Dr. G.K. Kapoor, Company Law and Practice - A Comprehensive Text Book on Companies
Act 2013, 23rd ed.