What is meant by the term ‘Promotion’? Discuss the legal position of promoters with respect to a company promoted by them.

Promotion of a Company is the first stage in the formation of a company. It involves conceiving a business idea and taking an initiative to form a company so that it can give shape to the available business opportunity.

The legal positions of promoters concerning a company are as follows-

• Promoters undertake various activities to get a company registered and get it to the position of commencement of business. But they are neither the agents nor the trustees of the company.

• They are not the agents as the company but they are personally liable for all the contracts which are entered by them, for the company before its incorporation

• Promoters of a company can make a profit by making deals secretly on behalf of a company.

• Promoters are not legally entitled to claim the expenses incurred in the promotion of the company.

• The company may allot some shares and give them an option to purchase the securities at a future date.