Corporate Law- Promoter
Rolly approached Molly and Polly and asked them to be shareholders to form a company. Then Rolly acquired a shop lot worth RM350,000 in order to prepare for the company in future. She bought this shop lot below the market price as the vendor was looking urgently to sell it. After the company is formed, she sold the shop lot to Jiggles Sdn. Bhd. at market price. Thus, she gained a lucrative profit of RM200,000 without the knowledge of any other party.
Definition of promoter
Section 4(1) of the Companies Act 1965 defined promoter is a person preparing prospectus. (not limited to this definition alone)
According to Cockburn CJ in Twycross v Grant (1877), a promoter is a “person who undertakes to form a company with reference to a given object and set it going and takes the necessary steps to accomplish the purpose”. (Company Law in Malaysia, pg42) A promoter may be a natural person for example when the sole proprietor promotes a company to take over his business. (Company Law in Malaysia, pg42) The promotion process includes negotiations, registration of the company, obtaining directors and shareholders and preparing the paper work. In this case, Rolly is the promoter of Jiggles Sdn. Bhd as she meets the definition of promoters. She is a sole proprietor who selling cupcakes, promoted the company to take over her business. Besides, she also obtained shareholders by approaching Molly and Polly.
Promoters’ duties Thus, Rolly is under a fiduciary relationship with the company. She has an obligation to act in good faith for the best interest of the company and must avoid conflict of interest which will affect her behavior. Under the duty of promoter, promoter should not make secret profit, defraud the company by active concealment, disclose confidential information, hides any personal interest. On the other hand, they should make a true and honest account to the company for his dealing on behalf of the company and make full and frank disclosure to
Definition of promoter
Section 4(1) of the Companies Act 1965 defined promoter is a person preparing prospectus. (not limited to this definition alone)
According to Cockburn CJ in Twycross v Grant (1877), a promoter is a “person who undertakes to form a company with reference to a given object and set it going and takes the necessary steps to accomplish the purpose”. (Company Law in Malaysia, pg42) A promoter may be a natural person for example when the sole proprietor promotes a company to take over his business. (Company Law in Malaysia, pg42) The promotion process includes negotiations, registration of the company, obtaining directors and shareholders and preparing the paper work. In this case, Rolly is the promoter of Jiggles Sdn. Bhd as she meets the definition of promoters. She is a sole proprietor who selling cupcakes, promoted the company to take over her business. Besides, she also obtained shareholders by approaching Molly and Polly.
Promoters’ duties Thus, Rolly is under a fiduciary relationship with the company. She has an obligation to act in good faith for the best interest of the company and must avoid conflict of interest which will affect her behavior. Under the duty of promoter, promoter should not make secret profit, defraud the company by active concealment, disclose confidential information, hides any personal interest. On the other hand, they should make a true and honest account to the company for his dealing on behalf of the company and make full and frank disclosure to