The expression promoter has been defined under Section2(69) in the Companies Act, 2013 as:
“promoter” means a person—
a) who has been named as such in a prospectus or is identified by the companyin the annual return referred to in section 92; or
b) who has control over the affairs of the company, directly or indirectlywhether as a shareholder, director or otherwise; or
c) in accordance with whose advice, directions or instructions the Board ofDirectors of the company is accustomed to act:
Provided that nothing in sub-clause (c) shall apply to a person who is actingmerely in a professional capacity;
The term is used expressly in sections 35, 39, 300 and 317.
In the case of Bosher v. Richmond Land Co., the term Promoter has beendefined as:
“A Promoter is a person who brings about the incorporation and organization ofa corporation. He brings together the persons who become interested in theenterprise, aids in procuring subscription, and sets in motion the machinerywhich leads to the formation itself.”
“A promoter is one who undertakes to form a company with reference to a givenproject and to set it going, and who takes the necessary steps to accomplishthat purpose.”
L.J. Brown in the case of Whaley Bridge printing Co. observed that the termpromoter is “a term not of law but of business”.
To be a promoter one need not necessarily be associated with the initialformation of the company; one who subsequently helps to arrange floating of itscapital will equally be regarded as a promoter. However, a person assisting thepromoters by acting in a professional capacity do not thereby became promotersthemselves. The relationship between a promoter and the company that he hasfloated must be deemed to be fiduciary relationship from the day the work offloating the company starts and continues up to the time that the directorstake into their hands what remains to be done in the way of forming thecompany.
The status of the promoter is generally terminated when the Board of Directorshas been formed and they start governing the company. Chronologically, thefirst persons who control or influence the company’s affairs are its promoters.It is they who conceive the idea of forming the company, and it is they whotake the necessary steps to incorporate it, to provide it with share and loancapital etc. when these things have been done, they handover the control of thecompany to its directors, who are often themselves under a different name. onhandling over the control of the company the promoter’s fiduciary and commonlaw duties cease, and he is thereafter subject to no more extensive duties indealing with the company than a third person who is unconnected with it.