Question

The following is not true about ‘promoter’:

• A. A promoter is not an agent or trustee of the company because the company before incorporation is a non-entity but he is in a situation akin to that of agent or trustee of company.
• B. A promoter may also be a director of his company.
• C. A promoter is required to make contribution in public issues of his company towards the amount that is being raised through the public issue.
• D. All of the above are true

Hint:

Promoters have fiduciary duties but no legal requirement to invest in public issues.

Answer 1

The Correct Option is C

Step 1: Understanding the role of a promoter.
A promoter is a person who undertakes to form a company and takes the necessary steps for its incorporation. He stands in a fiduciary relationship to the company but is not an agent or trustee before incorporation because the company is not yet a legal entity.
Step 2: Evaluating each statement.
(a) True — a promoter is in a position similar to that of an agent or trustee but is not legally one before incorporation.
(b) True — a promoter can later become a director of the company.
(c) Not necessarily true — there is no statutory requirement that a promoter must contribute funds in a public issue; his primary duties relate to promotion and compliance.
(d) False because (c) is incorrect.
Step 3: Conclusion.
Since (c) is not necessarily true, it is the correct choice for “not true.” \[ \boxed{(c)} \]