Companies Act Section 2(69) Promoter

Promoter Section 2(69)

A Promoter is an individual, group of individuals, or a company that takes the initiative to form a company. They play a pivotal role in the establishment, organization, and initial setup of a company before it is incorporated.

Key Roles and Responsibilities:

1. Initiative and Formation: 

Promoters conceive the idea of forming a company, identify business opportunities, and initiate the process of incorporation.

They undertake preliminary activities such as business planning, market research, feasibility studies, and raising initial capital.

2. Negotiation and Arrangement: 

Promoters negotiate with potential investors, lenders, and suppliers to secure necessary funding, resources, and agreements for the company's establishment and operations.

They may enter into preliminary contracts and arrangements on behalf of the proposed company before its incorporation.

3. Compliance and Disclosure: 

Promoters have a fiduciary duty to act in the best interests of the company they are promoting.

They are required to disclose all material facts, interests, and benefits derived from transactions involving the company to prospective shareholders and regulatory authorities.

4. Liability: 

Promoters may incur personal liability for their actions or representations made during the formation and promotion stages of the company.

They are accountable for ensuring compliance with legal requirements, ethical standards, and corporate governance norms during the initial stages of the company's existence.

Legal Framework:

Companies Act, 2013: 

Defines the rights, duties, and liabilities of promoters, including their obligations towards disclosure, compliance with regulations, and adherence to fiduciary responsibilities.  

Securities and Exchange Board of India (SEBI) Regulations: 

Prescribe additional requirements and disclosures for promoters, particularly in cases involving public offerings, mergers, acquisitions, and related-party transactions.