Discuss the rules and principles relating to promoters in the case of salomon and salomon & Co. ltd.

Essay by vincent1031 June 2004

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A promoter is a person who takes on the responsibility of setting up a co or any other venture. The promoter of a co were defined in section 4 as a person who brings the co into existence by taking an active part in forming co or finding persons to join it as soon as it is technically formed; taking an active part in forming co that actives include buying property for the co, taking lease for co, buying goods for co, employing professional to set up co and buying shelf co, and finding persons to join co that persons refer to directors, co sec, accountants, solicitors and shareholders. As case Twycross v Grant [1877] the courts held that the promoter is the person who undertakes to form the co with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose.

In the Salomon's case, Salomon is a promoter of the company, because of he formed a company to continue his large successful business, which was duly incorporated under the applicable English companies Act. The company was at all times intended to be what a private company is now. Basis on the section 4 Salomon was taking an active part in forming co. Moreover, Salomon, his wife and five of his children, each of them took up one share. Salomon and his two eldest sons were appointed directors, according to the Section 4 says, a promoter is person who find persons to join co to be directors and shareholders. So, Salomon is a promoter.

A promoter owes a fiduciary duty to the co which he is setting up. A fiduciary duty means that the person must act in the best interests of the co as a whole at all times.