Before a Company is incorporated, or in the process of incorporation, it is common for someone lay the groundwork of the Company.In practice, one does not always wait to receive the Certificate of Incorporation before commencing business.Negotiations for the purchase of material or land would already have commenced. The people who take the responsibility of starting the Company are referred to as Promoters.
In Tengku Abdullah v Mohd Latiff bin Shah Mohd, 2 MLJ 265 Gopal Sri Ram JCA said: "A promoter is one who starts off a venture-any venture-not solely for himself, but for others, but of whom, he may be one."
However the most cited case in this regard is Twycross v Grant where CJ Cockburn said,
" One who undertakes to form a company with reference to a given subject and to set it going and who takes all the necessary steps to accomplish that purpose.'
The promoter lays the foundations for a Company in terms of negotiations, registration of the Company, obtaining directors and shareholders and preparing all the paperwork.
However, because the Promoter is such an important person in the formation of the company, the law places several responsibilities on him. These are known as fiduciary duties. THE FIDUCIARY DUTIES
The following are some of the fiduciary duties that the Courts will insist that a Company promoter has to observe.
1.Top of the list is not to make a secret profit at the expense of the company
2.A duty to account to the company for the benefit for any property he might purchase with the intent of selling the property to Company for a pfofit later.
3.a duty not to defraud the Company by active concealment of any affairs relating to the company
4. a duty not to disclose confidential information to outsiders
5. a duty not to hide his personal interests through a nominee.
A Promoter is in a fiduciary relationship with the Company he promotes and as such he owes fiduciary duties towards it.This...
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