Promoter of a Company: The Person Behind the Processes

Last Updated at: April 17, 2020
2026
Promoters of a Company in India

A company is not just set up by an individual, it is the cumulative efforts of a team that builds the empire. It is their idea and struggle that leads to the profitable success of the business and the rise of the company. Promoters are the individuals who work rightfully and consistently to bring ideas to life. The promoter of a company is not a term included in the law but is an essential part of the business. 

  1. Who is the promoter of a company in India?

  2. Types of promoters of a company

  3. Liabilities of a promoter

  4. Steps involved during the promotion of a company

  5. Rights of promoters

  6. Conclusion

Who is the promoter of a company in India?

The promoter of a company can be an individual, partners, syndicate and not necessarily the owners. Some of them may have legal relations with the company, while some may not. The Indian Companies Act, 2013 defines the concept of a promoter in company law but does not assign any specific legal position to them. The promoter of a company is in association with the company from the ideation process to its incorporation. Moreover, the promoter of a company in India renders the supervision to carry out judicial decisions and sign the agreements as well. 

Types of promoters of a company

The promoter of a company in India includes the following type:

  • Professional promoters: They play a significant role to establish the company, and once all the procedures are complete, they hand over the company to the shareholders. Although there are not a lot of professional promoters of a company in India, it is quite common in countries like the UK, Germany, etc. 
  • Occasional promoters: They do not stay or work in the company regularly. They dodge between companies and take the promotion work on a floating basis. Examples of such promoters in company law include engineer, architect, lawyers, etc. 
  • Financial promoters: Some financial companies may take up the work of financial promotion of a company depending on the situation of the market. 

get free legal advice

Liabilities of a promoter

The liabilities of a promoter of a company in India include:

  • The rules do not allow them to make secret profits in any form. Out of company deals, or profits for personal promotion.
  • The deposition of all the amounts received on behalf of the company has to be done in the company account.
  • The promoter needs to take proper care while performing their tasks.
  • In the case of any contracts signed or pending, the promoters are solely responsible till their approval.
  • For any investments, the promoter has to make the compensation in case of any issues or untrue statements.

Steps involved during the promotion of a company

There are several steps involved during the promotion of a company which includes:

  • Ideation: The first and most important step is to have an idea and how to execute it. One must know what the business is about and look for opportunities in the field.
  • Investigation: The promoters create a proper well-planned structure of company management and execution. An expert opinion along with the cost-structure is sought and analyzed.
  • Name approval and registration: Once completed, the promoters are responsible for the application and registration of the company name with the Registration of Companies.
  • Appointments: After this, the promoters take the appointments from all the professionals to carry out various tasks and contracts.
  • Documents: The promoter in company law has to essentially keep all the legal and official safe for incorporation and further activities. 

Rights of promoters

Being a part of the company and its incorporation, the rights of promoters include the following:

  • Right of indemnity: In the case of partnership or involvement of over one promoter in a company, one promoter can deem the other for any untrue statements or secret profits. 
  • Right of preliminary expenses: The promoter has the right to receive the legitimate expenses for being a part of the company. Although it is not mandatory among the rights of promoters. It depends on the individual or the group to claim it. 
  • Right of remuneration: Additionally, the promoters usually receive their remuneration depending on the services or as per the will of the director. However, the promoter cannot sue the company until they have a legal contract for the same. They provide the remuneration in several ways, including:
    • Commission
    • Grant amount
    • Shares
    • Subscription of shares
    • Buying a part of the company’s property

Apart from the rights of promoters, they have several other duties and liabilities they have to adhere to. 

Conclusion

The promoters surely play an important role in the company’s establishment and its success. Whether it be dealing with the professionals or employing the workers, the promoters help in the best possible ways to set up the company.

 

 

 

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Promoter of a Company: The Person Behind the Processes

2026

A company is not just set up by an individual, it is the cumulative efforts of a team that builds the empire. It is their idea and struggle that leads to the profitable success of the business and the rise of the company. Promoters are the individuals who work rightfully and consistently to bring ideas to life. The promoter of a company is not a term included in the law but is an essential part of the business. 

  1. Who is the promoter of a company in India?

  2. Types of promoters of a company

  3. Liabilities of a promoter

  4. Steps involved during the promotion of a company

  5. Rights of promoters

  6. Conclusion

Who is the promoter of a company in India?

The promoter of a company can be an individual, partners, syndicate and not necessarily the owners. Some of them may have legal relations with the company, while some may not. The Indian Companies Act, 2013 defines the concept of a promoter in company law but does not assign any specific legal position to them. The promoter of a company is in association with the company from the ideation process to its incorporation. Moreover, the promoter of a company in India renders the supervision to carry out judicial decisions and sign the agreements as well. 

Types of promoters of a company

The promoter of a company in India includes the following type:

  • Professional promoters: They play a significant role to establish the company, and once all the procedures are complete, they hand over the company to the shareholders. Although there are not a lot of professional promoters of a company in India, it is quite common in countries like the UK, Germany, etc. 
  • Occasional promoters: They do not stay or work in the company regularly. They dodge between companies and take the promotion work on a floating basis. Examples of such promoters in company law include engineer, architect, lawyers, etc. 
  • Financial promoters: Some financial companies may take up the work of financial promotion of a company depending on the situation of the market. 

get free legal advice

Liabilities of a promoter

The liabilities of a promoter of a company in India include:

  • The rules do not allow them to make secret profits in any form. Out of company deals, or profits for personal promotion.
  • The deposition of all the amounts received on behalf of the company has to be done in the company account.
  • The promoter needs to take proper care while performing their tasks.
  • In the case of any contracts signed or pending, the promoters are solely responsible till their approval.
  • For any investments, the promoter has to make the compensation in case of any issues or untrue statements.

Steps involved during the promotion of a company

There are several steps involved during the promotion of a company which includes:

  • Ideation: The first and most important step is to have an idea and how to execute it. One must know what the business is about and look for opportunities in the field.
  • Investigation: The promoters create a proper well-planned structure of company management and execution. An expert opinion along with the cost-structure is sought and analyzed.
  • Name approval and registration: Once completed, the promoters are responsible for the application and registration of the company name with the Registration of Companies.
  • Appointments: After this, the promoters take the appointments from all the professionals to carry out various tasks and contracts.
  • Documents: The promoter in company law has to essentially keep all the legal and official safe for incorporation and further activities. 

Rights of promoters

Being a part of the company and its incorporation, the rights of promoters include the following:

  • Right of indemnity: In the case of partnership or involvement of over one promoter in a company, one promoter can deem the other for any untrue statements or secret profits. 
  • Right of preliminary expenses: The promoter has the right to receive the legitimate expenses for being a part of the company. Although it is not mandatory among the rights of promoters. It depends on the individual or the group to claim it. 
  • Right of remuneration: Additionally, the promoters usually receive their remuneration depending on the services or as per the will of the director. However, the promoter cannot sue the company until they have a legal contract for the same. They provide the remuneration in several ways, including:
    • Commission
    • Grant amount
    • Shares
    • Subscription of shares
    • Buying a part of the company’s property

Apart from the rights of promoters, they have several other duties and liabilities they have to adhere to. 

Conclusion

The promoters surely play an important role in the company’s establishment and its success. Whether it be dealing with the professionals or employing the workers, the promoters help in the best possible ways to set up the company.

 

 

 

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