Question

Scenario: Abdul and four friends wish to come together to form a new Company. They will need a large warehouse to store their product. They propose to name the company SoftClean Pty Ltd. Abdul will coordinate initial formalities, chase registration of the company and find a suitable warehouse that the company can use for storage. The friends each promised to contribute $50,000 individually for the new company towards share capital. Abdul instructs a solicitor to prepare the necessary documents for the new company. He finds a warehouse and agrees ona two year lease. He gets a web designer to build a website for online sales. Alter two weeks, none of the friends have paid the $50,000. Two are now considering putting the money elsewhere as they are not sure that SoftClean will be profitable but have not informed Abdul. They have done nothing in regard to the proposed company. The solicitor has now presented a bill for the work. The landlord has an invoice for the first quarter of the year. The web designer has also aked for a payment The company is yet to be registered at it now does not seem likely that it will be registered. Abdul is now very worried. QUESTION 8 PART D: State at least five duies of a promoter in relation to a company?

Answer 1

DUTIES OF A PROMOTER

1.Disclose the secret profit:

The promoter being in fiduciary position cannot make either directly or indirectly secret profit.Incase if the promoter has made any secret money by way of profit it is his duty to disclouse such secretly obtained money.He has the right to deduct the reasonable expenses incurred by him.

2.Duty to disclose private arrangments:

It is the duty of the promoter to disclose all the private arrangments which resulted him in profit by way of promotion of the company.

3.Disclose all the material facts:

It is promoters duty to disclose all the material facts.If a promoter enters into a contract to sell a property of a company without making a complete and full disclosure,and the property of the company was acquired by him at a time when he stood in a fiduciary position towards the company,the company has the right either to repudiate the sale or affirm the contract and recover the profit out of it by the promoter.

4.Promoter must make good to the company what he has obtained as a trustee:

It is the duty of the promoter to make good to the company what he has obtained as trustee and not what he may get at any time.A promoter stands in a fiduciary position towards the company.

5.Duties of promoter regarding the future allottees:

The promoter stands in a fiduciary position towards the company it doesn"t mean that they stand in such a relation only to the company or to the signatories of memorandums of the company and they will alsostand in this relation to the future allottees of the shares.