Explain the meaning of the term “Promoter” in relation to company law

Under Section 45 (5) of the Companies Act, Promoter means “Promoter who was a party to the preparation of the prospectus or of the portion thereof containing the untrue statement but does not include a person by reason of his acting in a professional capacity on behalf of the persons engaged in procuring the formation of the company”.
 In Twycross v Grant, it was observed that “a promoter I apprehend is one who undertakes to form a company with reference to a given project and set it going and who takes the necessary steps to accomplish that purpose”.

It has been observed that the term Promoter is not a term of law but of business usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence.
 Ordinarily a Promoter is a person who has taken some part in the formation of a company or in procuring persons to join it as soon as it is technically formed.

The role a Promoter plays may be active or passive.
 An advocate or accountant engaged by those interested in forming a company becomes a Promoter if he agrees to become or provide a director.
 It therefore follows that the question as to who a promoter is one of fact and varies from case to case.

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