Assembhng stage. In the third stage, i.e., assembly, the promoter trikes steps to secure co-ope Mtion of the required number of persons who will associate themselves with the project and act as the first directors of the company to be floated. It is then necessary for the promoters to enter into preliminary contracts for the acquisition of properties and assets, patent nghts, plant and equipment, underwriting of the issue of shares, etc. He also makes arrangements for installation of machinery, recruitment of persomnel I supply of raw materials,.power and such other things.
incorporation stage, The last stage in promotion isthat of incorporation of the company raising capital and launching the ship of the company on its course. The steps, which are required to be taken for registration irrolve drafting of various documents with the help of legal experts, anangiug payment of stamp duty and other legal fees and charges and comply;mg with the formalibcs laid down in that connection by the Confines Act (These fonnalihes are described hereafter )
LEGAL POSITION OF THE PROMOTER
The legal position of the promoter is that he is neither ;m agent nor a trustee of the company he promotes, since his functions as a promoter are perfornned at a time when the company has not yet come into existence. However, as one hav-inglnide powers and being intimately cormected with the formation of a company, the Compames Act imposes on him certain obligations which are-fiduciary in nature. As such, he occupies a fiduciary position (relation of trust) in relation to the company he promotes as well as the original allottees whom he induces to buy shares to the company, (1899) 2 Ch 392]. However, although the fiduciary relation of the promoterbegins onlvu hen the company is actually formed, his. fiduciary obligation begins as soon as he sets put to act as a promoter of that company
DUTIES AND OBLIGArlONS DF A PROMOTED
The promoters' functions relate mostly to the period before the incorporation of the company. Hence, they are expected to make a full disclosure of all facts relating to promotion to the Boarit of Directors and members who join the company after incorporation. The compamy IS not bound to ratify all contracts which the promoters might have entered into before its incorporation Nor IS the company liable to third parties for such n utracts Imtil the directors agree to treat them as binding on the company contracts entered into after incGrpoMtionbutbefore commencement Nonbusiness are biding on tire company after the Certificate for rhmnencement of Business has been obtained For the reasons stated above,
noters must act carefully This is of particular importance, 7,5 the promoters titled to any renmneration from the compare lnless the company yes to niake such payment. They cannot even recover expenses incurred them before incorporation without express approval of the Board of
INCORPORATION OF A COMPANY 67
Directors In actual practice. however, legitimate -expenses and reasonable remuneration are not denied to the promoters.