Duties of promoter
The promoters take possession of important position and responsibility towards the incorporation of a company. Promoters stand in fiduciary relationship with the company they are promoting. The fiduciary obligations of a promoter will arise automatically once he or she becomes the promoter of the company. There are some major duties of the promoter imposed by the court.
First of all is acting bona fine. ‘Bona fide’ is originally a Latin word which means doing and presenting in the absence of fraud. (Oxford Dictionaries) In the other words, a promoter is required to act honestly at all time in the perspective of best interest of the company instead of his own personal interests. In the case given above, Chin did not disclose to Ruth and Ali that his wife is the landowner and he resold the land to the company at a price higher than the original price. In short, Chin did not acting in good faith to exercise his duty.
Moreover, a promoter is not permitted to make any secret profits without the consent of the company out of the promotion of the company, unless he has sufficiently disclosed the profits made in the transaction. The most common way a promoter uses to make secret profits by purchasing a property himself and reselling to the company at a higher price. In the case given, Chin purchased a land at the price of RM1 million, but he resold to Mega Sdn. Bhd. at an enhanced price which is RM5 million. Chin has breached his duty as a promoter by obtaining a secret profit of RM4 million in this transaction.
As a promoter, he has a duty of not allowing his personal interest conflicts with the company. Accordingly, he must avoid himself involving in the contract and opportunity which belong to the company.
Furthermore, a promoter is responsible to disclose and disclose to an independent board of directors any advantages or interests he has