Corporate promoter

From Wikipedia, the free encyclopedia

A corporate promoter is not specifically defined in legal terms but is understood to be a person or entity who is active in the formation, organization, or financing of a corporation. This "person" might, for example, find investors who will buy shares in the corporation, which would provide funds which the company needs for its own purposes. The role of a corporate promoter may be undertaken, wholly or in part, by an investment banker, underwriter, or stock promoter.

A promoter is expected to have a fiduciary relationship to the corporation and to the shareholders, which is to say they are expected to be extremely loyal to the corporation and shareholders (referred to as the principal); they must not put any personal interests before the duty, and must not profit from their position as a fiduciary, unless in a manner to which the principal consents.

A promoter could be a shareholder in a company it promotes, however, if a promoter is the only shareholder of the corporation, it may be considered in violation of rules established by the Securities and Exchange Commission (SEC),in the US, if it does not disclose this information prior to selling shares to the public.

A promoter may also have a conflict of interests if is it contracted by a corporation and at some point sells some property or other thing of value to the corporation without previously disclosing to the corporation that it was the owner of that property. Because of its close inside relationship with the corporation, the promoter in this case might be able to charge a price much more than the company would otherwise pay. This would be considered to be a breach of their fiduciary responsibility.