News By/Courtesy: Sonika Sekhar | 27 Jan 2020 23:39pm IST

Promotion is an important concept incorporated under the Companies Act, 2013. Promotion refers to the advertisement or a form of bringing attention and notice to a newly formed company. Promotion is the first stage in the formation of a company. It sets the base of the future activities of the company, that is, registration, incorporation, issue of the prospectus and so on. The meaning of Promotion is not expressly defined under the Companies Act, 2013.

The process of Promotion is done by the promoters of the Company. The promoter or promoters pool in their efforts in order to attract the attention of the public and receive public acknowledgement.

Promotion is the first stage to the formation of a company, which is followed by registration, incorporation, floatation (which means the offer of shares to the general public for subscription) and finally, the commencement of business operations.

Promoters are individuals or groups of individuals, which can include an association, partners or even a company that can indulge in promotion for another company. These are the individuals that come up with the idea of the formation of the company, hence known as promoters.

The definition of promoters is incorporated in the definition clause of the Companies Act, 2013. Section 2 (69) describes the meaning of a promoter. According to this clause, a promoter is a person whose name has officially been assigned as the receiver of annual returns of the company and mentioned in the prospectus. A promoter can also be an individual who is in charge of the activities of the company and has direct or indirect control over the affairs of the company. On the direction or command of the promoter, the Board of Directors carry on their operations in the business.

However, a promoter need not necessarily be involved in the process of promotion of the company. It is not the necessary criteria for being a promoter. A promoter is the person or group of people who are involved in the providing of the original idea that forms the base of the company. Promoters may also be involved in the process of registration of the company.

The promotion of the company begins with the giving of the idea of the company and continues across the processes of registration, incorporation and so on till the affairs of the company are taken over by the Board of Directors of the company.

The promoter of a company cannot be known as the agent of the company. He or she has a fiduciary relationship with the company with wide legal powers regarding the company with a wide range of activities involved. The activities that the promoter of the company indulge in includes the conception of an idea for the formation of a company, preparing all the documents required for future procedures such as registration, appointment of bankers, brokers and so on.

 The promoter of a company does not receive any fixed renumeration for these activities. The renumeration could be mentioned in the Articles of Association or be in the form of assets, share allocation, commission on share and so on.

These are the major requirements of promotion and promoters in the formation of a company.

Section Editor: Prithvijit Mukherjee | 28 Jan 2020 12:48pm IST

Tags : COMPANIES ACT, 2013

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