Cases on promoters under the Company Act

Cases on promoters under the Company Act

Who is a promoter?

“Someone who undertakes all necessary steps to form a company” - Twycross v Grant

What are Promoter duties?

  • Make an adequate disclosure

  • Does not exercise undue influence

  • Cannot make a secret

How to make an adequate disclosure?

Full disclosure of any transactions he had entered into on behalf of the company by way of

  • General meeting (Public Limited “Bhd”)

  • Board meeting (Private limited “Sdn Bhd”)

What does it mean by undue influence?

Where the “consent” is obtained by some pressure whereby the other party was in a disadvantaged position

Am I ever making a secret profit?

Profit in terms of rebates, discounts or incentives received without the company’s consent either by way of in the connection of the company or via its nominee (family related).

What if I breach my duties as a promoter?

Company may:

  • Rescind the contract

    Case law : Erlanger v Sombrero Phosphate Co

  • Recovery of secret profit

    Case law : Gluckstein v Barnes

  • Claim damages for breach of fiduciary duties

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