Question

Answer in brief.

Write a note on - Role of Promote

Answer 1

(1) Discover the business opportunity: Promoters discover the business opportunity or idea of business proposed to be started. They collect the necessary information and test the idea i.e. to conduct the feasibility of a business idea.
(2) Resources mobilization: Promoters decide the aims and objectives of the proposed business. Amount of capital (finance) required scale of operation, etc.
(3) Prepare a draft of important documents: Promoters also draft the important documents required for incorporation of 3 companies such as Memorandum of Association. Articles of Association, prospectus, etc.
(4) Collection of capital (finance): Promoters then approach the different types of investors to collect needed finance or capital for the proposed business.
(5) Appointment of first directors: Immediately after the incorporation of a company. The promoters appoint first directors to take charge of the management of the company. Usually, promoters themselves nominate as the first directors of the company.
(6) Enter into preliminary contracts: Promoters then enter into a contract with third parties i.e. vendors, underwriters, banks, etc. on behalf of the proposed company. These contracts are called ‘preliminary contract’ or ‘pre-incorporation’
contracts; e.g. hiring of office, purchase of land. building, machinery, preparing and printing different documents, etc.
(7) Fiduciary duties towards the company: Promoters have certain fiduciary duties towards the proposed company they are setting up. They should be loyal, hardworking, and put efforts to protect and promote the interest of the proposed company. They cannot make any secret profit at the cost of the proposed company.