Functions of a Promoter for Company

Functions of a Promoter for Company

The idea of carrying on a business which can be usefully undertaken is conceived either by a person or by a group of persons who are called promoters. According to Guthmann and Dougall,

“Promoter is the person who assembles the men, the money and the materials into a going concern.”

The promoter is liable for promoting the features of a product to an audience or client. Shows how manufactured goods work takes questions, and attempts to influence customers or clients to buy a product.

Functions of a Promoter

The important functions of promoters may be listed as below:

(i) Identification of business opportunity: The first and foremost activity of a promoter is to identify a business opportunity. The opportunity may be in respect of producing a new product or service or making some product available through a different channel or any other opportunity having investment potential. It should be done with reference to the sources of supply, nature of demand, the extent of competition, capital requirements of the present and future, etc.

(ii) Feasibility studies: It may not be feasible or profitable to convert all identified business opportunities into real projects. The promoters, therefore, undertake detailed feasibility studies to investigate all aspects of the business they intend to start. Depending upon the nature of the project, the following feasibility studies may be undertaken.

  • Technical feasibility: Sometimes an idea may be good but technically not possible to execute. It may be so because the required raw material or technology is not easily available.
  • Financial feasibility: Every business activity requires funds. The promoters have to estimate the fund requirements for the identified business opportunity. If the required outlay for the project is so large that it cannot easily be arranged within the available means, the project has to be given up.
  • Economic feasibility: Sometimes it so happens that a project is technically viable and financially feasible but the chance of it being profitable is very little.

(iii) Name approval: Having decided to launch a company, the promoters have to select a name for it and submit an application to the registrar of companies of the state in which the registered office of the company is to be situated, for its approval. The proposed name may be approved if it is not considered undesirable.

(v) Appointment of professionals: Certain professionals such as mercantile bankers, auditors, etc., are appointed by the promoters to assist them in the preparation of necessary documents which are required to be with the Registrar of Companies. He should also consult with other impartial and disinterested experts and should see whether the idea is commercially viable.

(vi) Preparation of necessary documents: The promoter takes up steps to prepare certain legal documents, which have to be submitted under the law, to the Registrar of the Companies for getting the company registered. He should take the aid of legal experts in preparing the documents and should see that the documents are strictly in accordance with the provisions of the Companies Act.

Finally, after making necessary arrangements and modes of raising finance, he gets the necessary documents such as Memorandum, etc. printed, filed with the Registrar and then arranges for their publication.

In Summary, the Promoter performs the following main functions:

  • Decide the name and location of the company and also the amount and form of its share capital.
  • To conceive an idea of forming a company and explore its possibilities.
  • Conceive an idea of forming a company.
  • Analyze the profitability and feasibility of the idea.
  • Investigate the workability of the idea by consulting experts.
  • To conduct the necessary negotiation for the purchase of the business in case it is intended to purchase an existing business.
  • Prepare the Memorandum of Association, Prospectus, and other necessary documents and file them for incorporation.