Promotion of a company is that process by which, a company is incorporated by registration under the Companies Act and established financially as a going concern. The promoter must;
A promoter is generally anyone who assumes primary responsibility with regard to matter relating to promotion.
In Twycross Vs Grant, justice Cockburn described a promoter as one who (undertakes to form a company with a given objective, set it going and take all necessary steps to accomplish that purpose
A promoter is accountable to the Company for all money secretly received or any profit made directly or indirectly out of promotion whether made at the expense of the company or not unless the company consent to it after full disclosure of material facts, thus a promoter who makes a secret profit can be compiled to surrender to the company.
These are contracts purportedly entered into by promoters on behalf of the company before incorporation.
The following rules relate to pre-incorporation contracts.
In Kelner vs Baxter
A company was being formed to buy goods from Mr. Kelner. The contract was made by the promoter on behalf of the company for the purchase of wine from Mr. Kelner. When the company was formed the wine was delivered to it but before payment was made the company went into liquidation. It was held that the promoters were personally liable on the contract as the company could not be bound by contract.
In Howrd Vs Patent Ivory Limited
X agreed with Y who was acting on behalf of a company to be formed to sell a certain property to the company for cash. After incorporation X agreed with the company to take part of purchase money in debentures and the balance in cash. The contract was held to be valid and the company was bound by it because the variation of the terms as to the mode of payment amounted to a fresh contract after incorporation.
Natal Land Company Vs Pauline Colliery Syndicate
N Company agreed with a person acting on behalf of a future company F that N Company will grant a lease of a mine to P. P discovers coal but N Company refused to grant the lease to P. P Company sued for specific performance of the contract. It was held that P could not compel N to grant the lease as specific performance could not be granted due to lack of mutuality because the contract would not have been enforced against P and therefore P could not also enforce it against N.