PROMOTIONPromotion is the first stage in the formation of a company.

PROMOTER: Is one who identifies a business opportunity, analyses its prospectus and take steps to implement it through formation, normally becomes Directors. He is not an agent since there is no principal, not a trustee since there is no trust. A person who acts only in a professional capacity is not a promoter.

FUNCTIONS OF A PROMOTER:1) To conceive the idea, 2) To make detailed investigation, 3) To organize the resources,4) To obtain the consent of persons willing to act as first directors,5) To decide the name of the company,6) To get the necessary documents prepared,7) To file the necessary documents with ROC.

LEGAL STATUS & POSITION OF PROMOTERS Quasi trustee. Fiduciary Position: Not to make any profit at the cost of the Co., to give benefit of contract to Co., to make full disclosure of profit or interest, not to make unfair use of position no right to claim for remuneration unless there is a contract.

PRE INCORPORATION & PROVISIONAL CONTRACTS

PRE INCORPORATION OR PRELIMINARY CONTRACTS: Contracts entered into before the incorporation of Company : Co. is NOT bound by it. Company CANNOT enforce pre-in corporation contracts, NO ratification, Promoters are personally liable. After incorporation fresh contracts are made in terms of old contracts. Specific performance may be obtained provided the Co has accepted such contracts and has also communicated it to the other party. PROVISIONAL CONTRACTS: Contracts entered by Public Ltd Co. after incorporation but before getting certificate of commencement of business. All such contracts are provisional and NOT binding on Co. If it gets the certificate of comm. all such contracts become binding. If the contract is oppressive or fraudulent company can avoid it.

COMPANY FORMATIONPRELIMINARY STEPS: 2 or 7 or more persons - P Ltd or Public Ltd, subscribe their names to MOA, for a lawful purpose. Documents to be filed with ROC : MOA, AOA, agreement for appointment of MD, list of directors, a declaration that all legal requirements are met. Situation of Regd. office.

CERTIFICATE OF INCORPORATION: When all legal requirements are met ROC will issue. Certificate is a conclusive evidence of registration and it CANNOT be disputed or challenged on any ground. CASE LAW: JUBILEE COTTON MILLS LTD.EFFECT OF REGISTRATION: It shall become a body corporate, perpetual succession, a common seal, limited liability for members, and a distinct legal entity.

CERTIFICATE OF COMMENCEMENT OF BUSINESS: A Public Ltd Co. has to obtain this certificate before it can commence the business.