Premium Essay

Company Law - Promoter

In: Business and Management

Submitted By Mentha
Words 494
Pages 2
Duties of promoter
The promoters take possession of important position and responsibility towards the incorporation of a company. Promoters stand in fiduciary relationship with the company they are promoting. The fiduciary obligations of a promoter will arise automatically once he or she becomes the promoter of the company. There are some major duties of the promoter imposed by the court.
First of all is acting bona fine. ‘Bona fide’ is originally a Latin word which means doing and presenting in the absence of fraud. (Oxford Dictionaries) In the other words, a promoter is required to act honestly at all time in the perspective of best interest of the company instead of his own personal interests. In the case given above, Chin did not disclose to Ruth and Ali that his wife is the landowner and he resold the land to the company at a price higher than the original price. In short, Chin did not acting in good faith to exercise his duty.
Moreover, a promoter is not permitted to make any secret profits without the consent of the company out of the promotion of the company, unless he has sufficiently disclosed the profits made in the transaction. The most common way a promoter uses to make secret profits by purchasing a property himself and reselling to the company at a higher price. In the case given, Chin purchased a land at the price of RM1 million, but he resold to Mega Sdn. Bhd. at an enhanced price which is RM5 million. Chin has breached his duty as a promoter by obtaining a secret profit of RM4 million in this transaction.
As a promoter, he has a duty of not allowing his personal interest conflicts with the company. Accordingly, he must avoid himself involving in the contract and opportunity which belong to the company.
Furthermore, a promoter is responsible to disclose and disclose to an independent board of directors any advantages or interests he has…...

Similar Documents

Premium Essay

Company Law

...COMPANY LAW – Part 1 By Carl T. Abruquah Introduction The company is a form of business organization that involves a greater number of owners than a sole proprietorship or a partnership. It is a form that has arisen to meet the exigencies, complexity and rapidly expanding dimensions of business. It is a convenient form of business organizations in the sense that it enables investors to contribute to the capital of the organization without taking active part in its management. The rules governing companies and its management have developed over time as disputes arose and were resolved. Eventually, most countries have tended to codify these rules and practices in companies legislation. In Ghana, the two main legislation governing companies are the Companies Act, 1963 Act 179, and the Bodies Corporate (Official Liquidations) Act, 1963 Act 180. Nature of a Company In Salomon V Salomon and Co 1897, the court held that a company has a separate legal personality from that of its owners. A company can therefore sue other parties and be sued by other parties in its own name. A company is thus said to have a juristic personality, in other words a personality created by law. Section 24 of the Companies Code codifies this concept by providing that a company has the powers of a natural person of full capacity. Another term for this concept is the veil of incorporation. Another case that illustrates this concept is Macaura V Nothern Assurance Co. - 1925 in this case, the...

Words: 6420 - Pages: 26

Premium Essay

Company Law

...Questions B.Com. (III) Company Law Session 2012-13 (Short Answer Type Questions) (i) What do you mean by ‘Lifting of Corporate veil’? (ii) What is the difference between a Private company and Public company? (iii) Explain the procedure for converting a Private Ltd. company into a Public Ltd. company. (iv)Distinguish between transfer and transmission of shares. (v) What do you mean by the term ‘Charge’? (vi) Define Minutes. (vii) Explain the statutory provisions relating to quorum for different kinds of company meetings. (Long Answer Type Questions) Unit-I 1. Define the term ‘Company’. What are its characteristics? 2. Who is a Promoter? Discuss his legal position in relation to a company which he promotes. Also discuss the rights and liabilities of promoters. 3. What is Memorandum of Assoiation ? Set out various clauses which must be incorporated in the company’s memorandum. Also discuss the procedure for changing the object clause. 4. What is Prospectus? What are its contents? Also discuss the consequences of mis-statement in prospectus. Unit-II 5. What is a Share? Describe the various types of shares that can be issued by a company. 6. Define a Member. How can membership be acquired? Discuss the rights and liabilities of a member. 7. How are the Shares in a company transferred? Can the board of directors refuse to register transfer of shares? Whar is the remedy open to the transferee in such a case? 8. The Companies Act has prescribed......

Words: 381 - Pages: 2

Free Essay

Company Law

...Umunna represent the law in Singapore? To determine whether the decision in Island Export Finance Ltd (IEF Ltd) v Umunna represent the law in Singapore, the application of the common and statutory law will be used. Upon applying the right principles, the decision will represent Singapore law. Resignation to take up a corporate opportunity Singapore law states that the court held a director breached of his duty by taking up the opportunity if he resigns from a company to take up a corporate opportunity without the company’s permission where (i) the resignation was prompted or influenced by a desire to acquire the opportunity sought by the company or (ii) it was the director’s position with the company rather than a new initiative that led the director to the opportunity which the director later acquired. Intention for resignation A director will be held in breach of duty if his main intention of resignation is to take up the opportunity. Based on the facts, Umunna resigned due to his dissatisfaction with IEF. Hence, U was held not in breach of his fiduciary duty. This aligned with Singapore law as seen from Personal Automation Mart [PAM] v Tan Swe Sang where Tan resigns to take advantage of the contract sought by PAM and the court held that Tan had breached her fiduciary duties. Definition of corporate opportunity and source of information Singapore law defines a corporate opportunity as a business opportunity which the company is......

Words: 1718 - Pages: 7

Premium Essay

Company Law

...The Companies Act 2006 ( CA2006) was implement on 1st of October 2009. The Act contains an extensive code of company for United Kingdom and altered most of the aspect of the law in relation to companies. Furthermore, plenty of provisions for public and private had been introduced. Moreover the long term of investment and shareholder engagement has been enhanced. Sole Trader is owned or run a private corporation by one person who can control over decision making. Moreover the owner entitled to receive an all the profits. The drawbacks are unlimited risk for example the owner is entitled to pay off the debenture and damage of his business. It also has finance limited to resources of an individual. Partnership is consists of two or more individual and equally liable for the debts incurred by the business. It can share expensive resources and risks together. Moreover, undertake heavy workload. There would be a problem if the partnership changes. Limited Liability Partnership is a general partner which was introduced by The Limited Libility Partnership Act 2000. It is a separate legal personality and hybrid. Do not need to apply Partnership law. Partners are not directly responsible for debts. Limited Liability Company is a separate legal entity personality with limited liability. Has potential to acess winder range of funding. The disadvantages are accounting arrangement made public. It may be an illusion for small company. Company limited by Shares have ability to increase...

Words: 312 - Pages: 2

Premium Essay

Company Law

...MEANING, CHARACTERISTICS AND TYPES OF A COMPANY STRUCTURE 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.0 Objective Introduction Meaning of Company Characteristics of a Company Distinction between Company and Partnership Types of Company Summary Keywords Self Assessment Questions Suggested Readings OBJECTIVE After reading this lesson, you should be able to: (a) (b) (c) 1.1 Define a company and explain its features. Make a distribution between company and partnership firm. Explain the various types of companies. INTRODUCTION Industrial has revolution led to the emergence of large scale business organizations. These organization require big investments and the risk involved is very high. Limited resources and unlimited liability of partners are two important limitations of partnerships of partnerships in undertaking big business. Joint Stock Company form of business organization has become extremely popular as it provides a solution to (1) overcome the limitations of partnership business. The Multinational companies like Coca-Cola and, General Motors have their investors and customers spread throughout the world. The giant Indian Companies may include the names like Reliance, Talco Bajaj Auto, Infosys Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen and Tubro etc. 1.2 MEANING OF COMPANY Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company formed and registered under this Act or an existing company”. Section 3(1) (ii) Of the......

Words: 114302 - Pages: 458

Premium Essay

Company Law

...about promoters, the duties they owe to companies, and the remedies for breach of those duties. The best known of these is the description given by Cockburn CJ in Twycross v Grant (1877) 2 CPD 469 at 541: ‘one who undertakes to form a company with reference to a given project, and to set it going and… takes the necessary steps to accomplish that purpose’ (Cockburn CJ). In Whaley Bridge Calico Printing Co v Green (1880) 5 QBD 109 – “the term promoter is a term not 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” (Bowen J). In other words, promoter is a basically important person before the company incorporation. In this question, Candy, Becky and Asif are promoters. Because,these three people are undertakes to form an art gallery on-line Ltd. with reference to a given project, and to set it going and… takes the necessary steps to accomplish that purpose. In the end, Candy is seeks to negotiate a contract for the company before it is formed. As a promoter, Candy owes duties to the company, as shall now be discussed. There are five main fiduciary duties as follow. The first important point is promoter cannot make a secret profit during the expense of the company. The second is the promoter not to though a nominee to conceal personal interests. Next, the promoter not discloses confidential information to the outsiders. After that, promoters......

Words: 969 - Pages: 4

Premium Essay

Company Law

...in Public Law: Challenges and Perspectives, Faculty of Law, Universiti Teknologi MARA (UiTM), 13th to 14 December 2011, Shah Alam, Malaysia. ABSTRACT In Newton v Birmingham Small Arms Co (1906), the English court made it clear that the rights of auditors cannot be abridged nor restricted by any regulations of the company. This is to ensure that the auditors’ rights are secured. The rights are unqualified and this will enable auditors to discharge their role and duties effectively. Additionally, the Companies Act 1965 (CA) gives substantive powers to enable auditors to carry out their duties effectively. This is because if their hands are tied, they will not be able to uncover any wrongdoings by the company’s management. In fact, any one who obstructs their duties, is in breach of the CA. Auditors have a right of access at all reasonable times to the accounting records and other records, including registers of the company. Moreover, the CA provides that auditors enjoy qualified privilege in certain circumstances. Thus, this study investigates imperative issues on the office of auditors concerning rights, powers and privilege. This is to strengthen the role and duties of auditors to bring about a more meaningful existence of auditors. In doing so, this study will explore the necessary reforms that should be made on the issues concerning the office of auditors. Auditors’ office and powers should not be taken lightly. Nevertheless, the provisions in ‘the Companies Act’,......

Words: 5159 - Pages: 21

Premium Essay

Company Law

...Company Law - By Avinash Balakrishna Written by Hanumant's Law Journal Saturday, 07 August 2010 23:49 - Last Updated Wednesday, 20 October 2010 16:39 Click here to read Notes on Company  Law (Contributed by Avinash Balakrishna  avi.b89@gmail.com ) 1. Explain the Advantages and Disadvantages of Incorporation of a Company. (L) 2. Distinction between Company and Partnership.(M) 3. When can Corporate Veil of a Company be Lifted?(L) 4. Write a Note on Pre-incorporation Contracts.(M) 5. Is company a citizen?(S) 6. Explain the Procedure for Registration of a Company.(S) 7. Write a Note on Certificate of Incorporation (sec 34 and 35)(S) 8. Explain the Clauses of Memorandum of Association OR Explain the Importance of Memorandum of Association.(L) 9. Explain the Procedure for Alteration of Memorandum of Association.(M) 10. Articles of Association.(L) 11. Difference between articles and memorandum.(S) 12. Alteration of articles (sec 31)(S) 13. Explain the Doctrine of Ultra-vires.(L) 14. Explain the Doctrine of Constructive Notice.(L) 15. Explain the Doctrine of Indoor Management OR Explain the Rule laid down in Royal British Bank v. Turquand.(L) 16. Prospectus(M) 17. Prospectus- Remedies for Misrepresentation(M) 18. Promoters.(M) 19. Directors- Powers, Duties and Position.(L) 20. 21. 22. 23. 24. Quorum (Section 174).(S) Kinds of Companies.(L) Government Company.(S) Conversion of a Private Company into a Public Company.(M) What are the Advantages of a Private Company?(M) 1/2 Company...

Words: 298 - Pages: 2

Premium Essay

Malaysian Company Law

...undesirable consequences. Under certain occasionally, the court will go behind the corporate veil. In refer to cases of Yap Sing Hock v Public Prosecutor where the Supreme Court Peh Swee Chin SCJ would suggest the veil to be lifted by statutes, e.g. the Companies Act 1965 itself for certain specific purposes. The lifting of veil clearly constitute there a violation of the primary principle but this has come to be treated correctly as an exception to the primary principle. There are two situation where Act has provided that the court can lift or pierce the corporate veil related to the facts. Firstly would be the duty to not trade while insolvent. As general directors’ duties, to prevent company trading if it is insolvent. This means much consideration is required before incurring a new debt under reasonable grounds to suspect that the company is insolvent or will be insolvent as a result of incurring the debt. Under Section 304(2) conjunction with S303(3), The Act would makes an officer personally liable to creditors for debts incurred by the company knowingly the contract has no reasonable or probable ground of expectation of the company being able to pay the debt is guilty of an offence. An understanding of the financial position of the company only when sign off on the yearly financial statements is insufficient whereas constantly aware of company’s financial position. Applying to the fact, where Samy should have known the financial position and signing of new debt might......

Words: 2413 - Pages: 10

Free Essay

Company Law

...Charles Prospect to |give the required presentation to the client | | |deliver his presentation to Bean & Co. |It should clearly describe the personality of a company | | |The report will be assessed for the |separate from its owners and board | | |demonstrated knowledge of the legal |It should also describe the process by which a company | | |formation of a company, forms of |can be formed and registered | | |corporate body and procedures for company|The different forms of corporate body that can be formed| | |formation. Case Study 1 provides |should be clearly described | | |background information for this. | | | | | | | | | | | |Candidates should give written answers to|Answers should provide clear understanding of how a | | |the three questions on company finance. |company’s financial arrangements can be understood | |2. | |Shares ......

Words: 3692 - Pages: 15

Premium Essay

Company Law

...Contents Task 1: Understanding the nature of a Company 3 1.1. Concept of corporate Personality 3 1.2. Lifting the veil 3 1.3. Advantages and disadvantages of incorporation 3 1.4. Promoters 4 1.5. Pre-incorporation contract 5 1.6. Requirements of registration of an incorporated business entity 5 1.7. Requirements for trading commencements 5 Task 2 Memorandum, Articles of Association, ultra Vires and their Effects and contents of Prospectus 6 2.1 Requirements for memorandum of association 6 2.2 Articles of Association 6 2.3 Evaluation of doctrine of ultra vires and its effects 6 2.4 Contents of a prospectus and listing particulars 7 Task 3 types of capital, laws relating to issue of shares and dividends, capital maintenance and insider dealings 8 3.1 Types of Share Capital 8 3.2 Law regarding Issue of shares, class rights and dividends 8 3.3. Capital maintenance 9 3.4. Insider dealings 10 Task 4: Understanding about shareholders, directors, charges and insolvency 10 4.1-The Role and powers of the directors: 10 4.2-Different Types of Meetings: 11 4.3-Law on Minority Protection: 11 4.4-Rights of Stakeholders and Debenture Holders: 12 4.5-Liquidation: 12 Bibliography 13 Task 1: Understanding the nature of a Company 1.1. Concept of corporate Personality Corporate personality means that “the company’s liabilities are the legal responsibility of the company and the members will not be liable for the company’s debts” (Talbot,......

Words: 4463 - Pages: 18

Premium Essay

Company Law

...Chapter: 622 Companies Ordinance Long title Gazette Number Version Date L.N. 163 of 2013 03/03/2014 An Ordinance to reform and modernize Hong Kong company law, to restate part of the enactments relating to companies, to make other provision relating to companies, and to provide for incidental and connected matters. [Parts 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 17, 18, 19 and 21 Part 2, except— section 27(3), (4), (5) and (6) in so far as it relates to a director or reserve director sections 47, 49, 50, 51 and 52 and Subdivision 2 of Division 7 Part 12, except— section 643(1)(a)(ii), (2)(b) and (3)(b) in so far as it relates to a correspondence address sections 643(5), 644, 645(5), 647(4) and (5), 651 and 657(2)(g) Part 16, except sections 791(4) and 802(4) and (5) Part 20, except section 908 Schedules 1, 3, 4, 5, 7, 9 and 10 Schedule 2, except section 3(1)(a)(iii) and (2) Schedule 6, except sections 3 and 4 Schedule 11, except section 115 (Enacting provision omitted—E.R. 1 of 2013) (Originally 28 of 2012) Part: 1 Preliminary L.N. 163 of 2013 03/03/2014 } } } } } } } } } } } 3 March 2014 L.N. 163 of 2013] } } (*Format changes—E.R. 1 of 2013) ____________________________________________________________________________ Note: * The format of Part 1 has been updated to the current legislative styles. Part: Division: 1 1 Short Title and Commencement L.N. 163 of 2013 03/03/2014 Section: (1) (2) 1 Short title and commencement L.N.......

Words: 240246 - Pages: 961

Free Essay

Company Law

...they have been the victim of wrongdoing by those in a ‘majority’……….…………………...Pg 7 & 8 References………………………………………………………………………………………………………………….Pg 9 & 10 Introduction of the Case of Foss v. Harbottle The Victoria Park Company is a company had been established during September 1835. This company is to establish a residential area for the prosperous business and professional families to stay. This estate will be established to the east of Wilmslow Road. Richard Foss and Edward Starkie are the minority shareholders. A bill was lodged by 2 shareholders of the company that incorporated by Art of Parliament, on their own and the other shareholders’ behalf. In the case they claim that fraudulent transactions misapplying the company’s assets did by 3 bankruptcy directors, a solicitor, proprietor and architect, and take some unqualified people to put in board of director to make it full and a company without clerk or office, in this situation the proprietors has no rights to take out the property from the hand of defendant directors. Observations were made on this point of case is that the trust between the company and company promoters had arises. Void transaction is not necessarily to be created by the possible of avoiding a transaction. A company can select to apply the transaction later and hold the directors bound by them. If the act is given the power that authorized the transaction on mortgage then they can be confirmed. Although this act is the act beyond the......

Words: 3041 - Pages: 13

Premium Essay

Company Law for Business 100

...Company Law for Business: Assignment 1 (i): Is the cat contract with Feline Fertility Pty Ltd enforceable? Your answer should include an analysis of the reason put forward by Lassie Ltd for terminating the contract. The area of law relating to this particular question is the Corporations Act 2001 section 124, which mentions the legal capacity and powers of a company, and section 125 (2), which refers to a company's objects within its constitution. As Lassie Ltd is a company, it is a separate legal entity, meaning it can enter into contracts in the same legal way a normal human being could. Lassie Ltd's constitution includes the objects clause stating that the company's activities are to be restricted to the breeding and selling of dogs and goods and services associated with dogs, this is why Lassie Ltd wants to terminate the contract. This objects clause does not prevent the company from entering into any contracts as the company can enter into any contract that it wants to as it is a separate legal entity. Despite the fact that Lassie Ltd broke its company constitution, the contract is still enforceable with Feline Fertility Pty Ltd due to the abolishment of doctrine of ultra vires. The abolishment of doctrine of ultra vires means a company cannot enter into contracts beyond their power and then later avoid their legal obligations on the grounds that they had no legal capacity to enter into the contract. Lassie Ltd knowingly entered into the contract to purchase 300...

Words: 2714 - Pages: 11

Premium Essay

Company Law

...Discuss the procedure to incorporate a public company in Malaysia. The law relating to incorporation of a company in Malaysia is governed by the Malaysian Companies Act, 1965. As per the act any company doing business or wishing to do business in Malaysia must register with the Companies Commission of Malaysia (CCM) under the Companies Act 1965. To incorporate a company, a person must apply the application of search name. A name search must be conducted to determine whether the proposed name of the company is available. Refer to Government Gazette No. 716 dated 30 January 1997, Gazette (Amendment) dated 11 October 2001, Guidelines For Naming A Company and Guidelines For Application Of A Company Name. The steps involved are completion and submission of Form 13A CA (Request For Availability Of Name) to SSM and Payment of a RM30.00 fee for each name applied. Where the proposed company’s name is approved by SSM, it shall be reserved for three months from the date of approval. A person must lodgment of incorporation documents. Incorporation Documents must be submitted to SSM within 3 months from the date of approval of the company’s name by SSM, failure of which a fresh application for a name search must be done. An original of the Memorandum and Article of association shall each be stamped at RM100.00. Stamps are affixed at the Inland Revenue Board’s stamp office. The first directors and secretaries shall be named in the Memorandum......

Words: 599 - Pages: 3

Une superstar pour Noël | Geballte Comedy-Ladung: Happy!, Th... | Zealot (14)