Q.Who is a Promoter?

Before a company can be registered, someone has to conceive the business idea and actually set the wheels in motion — that person is the promoter.

A promoter is the person, or group of persons, who conceives the idea of forming a company and takes the steps needed to translate that idea into a functioning, registered company. Section 2(69) of the Companies Act, 2013 identifies a promoter as a person named as such in the company's prospectus or annual return, or a person who controls the company's affairs directly or indirectly (as a shareholder, director, or otherwise), or a person on whose advice or instructions the Board is accustomed to act — excluding advice given only in a purely professional capacity, such as by the company's advocate or Company Secretary. In practice, a promoter carries out the feasibility study, gets the proposed name approved, arranges for the Memorandum and Articles to be drafted, appoints the first directors and other officers, and raises the initial funds needed before the company is formally incorporated.

Students often confuse a promoter with a director or a shareholder. A promoter's role is confined to the formation stage; he need not remain a director or even a shareholder once the company is running.