Kinds of Promoters in Business
“A promoter is the one who envisages an idea for setting up a particular business at a given place and carries out a variety of formalities required for starting a business. ”
A promoter is the one who envisages an idea for setting up a particular business at a given place and carries out a variety of formalities required for starting a business. A promoter may be an individual, a firm, an association of persons or a company.The promoters may be professional, occasional, financial or managing promoters. Professional promoters handover the company to the shareholders when the company starts. Unfortunately, such promoters are very scarce in the developing countries.
They have played an important role in many countries and helped the business community to a great extent. In U.K. Issue house, in U.S. Investment Bank and in Germany, Joint Stock Banks have played the role of promoters very significantly.
Occasional promoters are those whose main interest is the floating of companies. They are not in promotion work on regular basis but take up promotion of some companies and then go to their earlier profession. For example, engineers, lawyers etc. may float some companies.
Financial promoters do the task of promoting the financial institutions. They generally take up this work when financial environment is favorable at the time. Managing promoters played a significant role in promoting new companies and then got their managing agency rights.
The promoters have to put up with risk when they involve themselves in the promoting of new companies. Their main motive behind this is profit. As is well known that there can’t be much profit without any kind of risk, so this risk is well judged and understood by the promoters.
In the developing countries, promoters try to become managing directors of the companies promoted by them, so they do not charge anything separately.
In other countries, promoters may be given lump sum amount for their services or they may also be allotted shares or debentures too. They may even be offered some kind of commission that is linked to the purchase price of the business.
A promoter is neither an agent nor a trustee of the company as it is a non-entity before incorporation. Some legal cases have tried to spell out the standing of promoters.
Author - DeeKay
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