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Chapter 7

Promoters

There is no statutory definition of a promoter. A promoter is anyone who
makes business preparations for a company or as stated in the case
of Twycross v Grant (1878), a person who, ‘undertakes to form a
company and who takes the necessary steps to accomplish that
purpose.’

The definition excludes people acting in professional capacity.

A promoter is under a fiduciary duty to:

 Exercise reasonable care and skill;

 Disclose any interest in transactions with the company and not to make a
‘secret profit’, and

 Disclose any benefit acquired to an independent board and/or to the
shareholders.

Remedies available to the company if a promoter makes a secret profit:

Remedy Problems

Rescind the contract. Not always possible e.g. if a third party has rights under the
contract.

Obtain damages. Must prove loss.

Recover the profit. Must prove that the promoter failed to disclose profit.

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