Meaning of Promoter

Posted on 02-04-2016        By ADMIN

Meaning of Promoter

A promoter is a generic term associated with the person whostarts a business. In common parlance, this person is also referred to as thefounder of the business. A promoter typically is responsible for raisingcapital, targetting initial leads and chasing initial business opportunities,entering into the initial contracts for the business formation andincorporating the company.

The Substantial Acquisition of Shares Takeovers (SEBI) Regulation states thatthe promoter is:

(a) any person who is in control of the target company

(b) any person named as promoter in any offer document of the target company orany shareholding pattern filed by the target company with the stock exchangespursuant to the listing agreement, whichever is later;

In the old Companies Act, 1956 there was no static definition of promoteralthough it was mentioned in various section, but in the new Companies Act,2013 Section 2(69) defines promoter.

Position of promoter in Companies Act, 1956 and in differentStatues

The expression ‘promoter’ has not been definedunder the Companies Act, 1956, although the term is used expressly in sections62, 69, 76, 478 and 519. Section 62 of Companies Act, 1956 defines ‘promoter’for the limited purpose of that section only. Section 62(6)(a) defines theexpression ‘promoter’ to mean a promoter who was a party to the preparation ofthe prospectus or of a portion thereof containing the untrue statement, butdoes not include any person by reason of his acting in a professional capacityin procuring the formation of the company. 

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