Q.What is meant by a "Promoter" of a company?

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

A promoter is the person who conceives the idea of forming a company and takes all the steps necessary 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 prospectus or annual return, or a person who controls the affairs of the company directly or indirectly (as a shareholder, director, or otherwise), or a person on whose advice or instructions the Board is accustomed to act — except where such advice is given only in a professional capacity, such as by a company's lawyer or auditor. In practice, a promoter carries out the feasibility study, arranges the name approval, gets the Memorandum and Articles drafted, appoints the first directors and other officers, and raises the initial resources 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. Another common slip is calling the promoter an "agent" of the company — legally he cannot be an agent of a company that does not yet exist.