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Question
Explain the following term/concept.
Promotion
Solution
Meaning: To bring the joint stock company into existence, 3 lot of preliminary work is needed to be completed. This includes different activities like discovering business ideas, raising finance, property and management skill and taking various decisions to form the company. The process through which a company gets formed is called company promotion.
According to Gerstenberg. The promotion is ‘the discovery of business opportunities and subsequent organisation of funds, property and managerial ability into a business concern for the purpose of making profits from the newly floated enterprise.
Stages in promotion:
(1) Discovery of an idea i.e. business opportunities.
(2) Preparing a financial plan.
(3) Preparing a draft of Memorandum of Association and Articles of Association.
(4) Entering into Preliminary contracts with third parties.
(5) Appointment of First directors.
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