The Role of a Promoter

I can say that, promoter means a person who takes initial steps to form a company. For doing all these step not any role limit and the nature role of the promoters. They prepare the various documents and take all necessary steps for the registration of the company, whether a person is a promoter or not depends upon the circumstances of each case.

According to the companies ordinance 1984 and contract act 1872 does not describe the word “promoter” as any specific description and detail on how attempts have been made in various judicial decision. The members who take project in the formation of the company are called promoters. The arrangements of certain legal document and get all necessary steps for the registration of the company. They encourage responsible persons to act as first director of the company. In according to the company’s ordinance 1984 of the promoters is that to receive the preliminary expenses from the company, to receive remuneration for their services, to receive the proportionate money from promoters. The four main stages of for pre-incorporation contracts of the company Promotion stage, Incorporation stage, rising of share capital, Business commencement certificate. Many types of promoters like a Professional promoters, Occasional promoters and just Promoters.

The promoter of the company are under an obligation to disclose fully all material facts relating to the formation of the company of the best relationship between the promoters and a company is of fiduciary personality. All these under the some condition like a disclosure must be actual and express, it must be made to a body of persons acting on the behalf of the persons, and Body of persons must be in position who can exercise independent judgment. A promoter is responsible for any secret profit that he may have made during the formation of the company.

The simple reality of incorporation is not affected the promoter contracts and the initial forming corporation is not in that condition they become a party to the making contract made earlier than incorporation and its name for its benefit. Four theories have been advanced as to how the liabilities of the corporation may arise in which included ratification, adoption, continuing offer accepted and renovation by the corporation based upon a mutual agreement of all the contract parties.

Before the passing of the Companies Ordinance1984, the position in Pakistan, regarding pre-incorporation contract was comparable to the Common Law. This is a general rule of contract that when two consenting parties are spring to contract each other and third party is not connected without the terms and condition of enforcement and liability , so company does not come in existence before its incorporation and the promoter signed contract on behalf of company as a third party. Promoters are commonly detained individually liable for pre-incorporation agreement. If a company doesn’t approved and take on a pre-incorporation contract under the contract Act, then the principle of common law would be applicable and the promoter will be liable for infringe of contract.

In the Common Law identify that the rule of promoter is individually responsible for pre-incorporation contract, USA Laws much more innovative and effective to solve the problem of Pre-incorporation Contract. In the Common Law, the adoption and ratification after the incorporation did not discharge the promoter from liability of pre-incorporation contract.

I analyze that promoter is personally liable for the pre-incorporation contract, because at the time of formation of pre-incorporation contract, the company does not come in existence, so never the principle mediator relationship survive not the company developing into the party. Company normally does not liable for the pre-incorporation contract when it comes into existence but under the arrangement of section; company can take the rights and liability of promoter. It is also found that promoter is personally liable for the pre-incorporation contract 1984.