PROMOTION AND INCORPORATION

Transcription

1 PROMOTION AND INCORPORATION PROMOTER: A promoter is a person who discover business opportunities, organise funds, properties, managerial capabilities and launch enterprise for going concern.. What a PROMOTER does? Gets the memorandum formed and printed Enter into contracts with Directors Enter into contracts for properties Secures initial Capital Original allottee of shares..etc. PROMOTION STAGE OF THE COMPANY INCLUDES ALL THE ACTIVITIES OF A PROMOTER LEGAL POSITION OF A PROMOTER: A PROMOTER is a like a quasi-trustee(almost like a trustee), as company does not exist at the time of promotion.. *HERE COMPANY IS REFERRED TO AS A TRUST, SO PROMOTER IS ITS TRUSTEE* A Promoter stands in a fiduciary position which deals with a position of trust and confidence

2 A Promoter must make full disclosure of all relevant and material facts including any secret profits made during the promotion of a company.. DUTIES OF A PROMOTER: Cannot make secret profits and if he does company can recover it with interest. At the same time company can set aside contracts made with promoter and can recover back money.. GLUCKSTEIN VS BARNES X,Y,Z form a syndicate to form a company.. They bought debentures of Old Olympia at discounts and later they bought the old Olympia at 1,40,000 pounds. They paid back their debentures in full making a profit of 20,000 pounds. They sold Old Olympia for 1,80,000 pounds to a new company promoted by them. They revealed the profit of 40,000 pounds in prospectus made by them on sale of Olympia but not the profit of 20,000 pounds made on sale of debentures. So this was considered as secret profits..

3 Make full disclosure of all material facts including sale of own property to company Must not make unfair use of position Disclosure of above three facts to / in: Independent Board of Directors First Shareholders Prospectus Articles Pre-Incorporation/Preliminiary Contracts These are the contracts which promoters enter into to acquire some property or right for the company before its incorporation.. Legal Position of Pre-Incorporation Contracts Nullity and Void (company can neither sue nor be sued for pre- incorporation contracts) (RE) ENGLISH & COLONIAL PRODUCE CO. & LTD. The Promotes instructed soli itor to prepare memorandum & articles on their behalf and get it registered..

4 After a while it went into winding up, So solicitor ask for compensating him for the expenses but company said that it was a void contract, so it is not liable Can t be ratified after incorporation NATAL LAND & COLONIALISM CO. VS PAULINE COLLIERY & DEVELOPMENT SYNDICATE LTD Mrs. A who was promoter of P Ltd. Contracted with N to do mining. N later did not allowed to do mining.. P Ltd. After being registered sued N for specific performance.. N said that contract was with Mrs. A but not with P Ltd., so it can not be ratified after incorporation. It was decided to enter into a new contract.. Promoter remains liable for pre-incorporation contracts KELNER VS BAXTER K supplied wine to B who was the promoter of hotel.. Money was not paid to K although all the wine was consumed. K sued B.

5 B said he did not consumed it but hotel did so. Still, the promoter(b) was held liable.. **Under Specific Relief Act,1963, companies was allowed to adopt the Pre-Incorporation Contracts through ratification provided it is for the purposes of company and falls within object clause of company & such contract is warranted by terms of its incorporation.. U/S 19(e) Other party can enforce company U/S 15(h) Company can enforce other party IMPERIAL ICE MANUFACTURING CO. VS MANCHERSHAW In this case, promoters of a company contracted with Manchershaw to buy ice manufacturing machine from him.. Later it was ratified as this was for the purpose of the company.. IMPERIAL TEA MANUFACTURING VS MUNCHERSHAW Munchershaw promised the promoters to buy shares after incorporation but Munchershaw did not buy them.. Company can not held him liable, so Munchershaw won the case.

6 CONCLUSIVENESS OF CERTIFICATE OF INCORPORATION U/S 34, Life of a company commences from the date mentioned on the certificate of incorporatin, even if the date mentioned is wrong JUBILEE COTTON MILLS VS LEWIS Memorandum of Association & Articles of Association were sent for registration on 6 th January 1920 and certificate was isssued on 8 th January 1920 with 6 th January 1920 printed as date of its registration. Shares were allotted to Lewis on 6 th January This was objected as certificate was issued on 8 th January but Courts said it is valid as on the certificate 6 th January was mentioned.. U/S 35, Once certifcate is issuedit means that all requirements have been complied with in respect of registration and no one can enquire into any irregularity of prior proceedings

7 If Memorandum is signed by 1 person or all members are infants, certificate will still be conclusive.. MOOSA GHULAM ARIFF VS EBRAHIM GOOLAM ARIF Memorandum of Association was signed by 2 adults and 1 guardian of 5 minors. Guardian did different signatures for all minors. It gets registered.. Plaintiff argued the there were not 7 members, but courts said that the certificate is conclusive. **So, Illegal objects can be registered, the only remedy is to extinguish such a company by winding up..