company law

Promoters, as defined in Twycross v Grant (1877) 2 CPD 469, are persons who involved in the incorporation of a company. And the common law has extended the scope of “promoter” further in Tracy v Mandalay Pty Ltd (1953) 88 CLR 215. In this case, the High Court held that the promoters are not just these persons who take an active part in the formation process, but also these who profits from the operation of the company with a passive role. Applying this doctrine to the case study, Alicia can be regarded as one of the promoters of Batco Ltd, since she had involved in the formation of the company and ranked as one of the three directors after the registration. It’s also noticeable that the other two directors, Adam and Robin, were former employees of Alicia. Thus, even though Alicia didn’t play an active role in the formation of the company, the connection between her and Batco before and after the registration was solid. According to Aequilas v AEFC (2011) 19T ACLC 1006, the legal consequence of a person being identified as a promoter is that such person owes stringent fiduciary duties to the company and its shareholders. They are required to act in good faith and place the company’s benefits over their own (Harris, Hargovan and Adams 2011). More specifically, in Erlanger v New Sombero Phosphate Co (1878) 3 CA 1218, the House of Lords held that promoters have the duty of fully disclosure to a board of independent directors of the material facts when they enter into contract relations with the company; Or, as stated in the in Aequilas v AEFC (2011) 19T ACLC 1006, the court also accepts an explicit disclosure made to shareholders. Taking these judgments into account, Alicia, as a director of Batco Ltd, as well as a promoter, breached her fiduciary duties. Because Alicia, as a party to the contract with Batco, didn’t make known the notification she received from a government clerk to the company before they entered into the contract. Although without