Also known as: promoters · promotion · promotions · company promoter
Written by attorneys · grounded in primary & secondary sources — see below
A person who organizes and initiates the formation of a corporation or other business venture. The promoter stands in a fiduciary relationship to the entity and to contemplated investors and may not retain secret profits from transactions with the entity without full disclosure and approval.
Select any source to read its text and confirm it supports the definition.
Piper Patel organizes a charitable trust to advance education by funding scholarships for underprivileged students. She drafts the trust instrument to specify that purpose and transfers assets into the trust. Because the purpose qualifies as beneficial to the community, the trust is validly created.
Paige Porter acts as promoter for Phoenix Technologies and causes the new corporation to become a member of a joint venture developing software. The corporation's articles grant it the power to serve as a promoter of other entities. Paige's action is therefore within the corporation's authority once formed.
Pilar Pena, promoter of Prosperity Investments, sells land she owns to the corporation at a markup. She discloses the profit only to two initial subscribers but not to all persons contemplated as original investors. The corporation may rescind the transaction or recover the secret profit because full disclosure to every contemplated initial shareholder was required.
Priscilla Parks organizes a new securities offering and receives material nonpublic information. The information is tipped to select investors who trade on it. Liability analysis focuses on whether any duty of disclosure was breached.
Penelope Price organizes a public offering and makes statements about financials that turn out to be false. The SEC brings an enforcement action. An injunction may issue under the antifraud provisions when scienter is shown.
Philip Powell organizes events for Prime Logistics and is subjected to unwelcome advances by a supervisor during a road show. The company has an anti-harassment policy with complaint procedures that Philip did not use. The employer avoids vicarious liability because it exercised reasonable care and Philip suffered no tangible employment action.
A promoter owes fiduciary duties of loyalty and disclosure to the corporation and to all persons contemplated as original investors. The promoter may not retain secret profits from sales of property to the corporation unless full disclosure is made to every contemplated initial shareholder and approval is obtained.
The Act expressly grants a corporation the power to be a promoter of any partnership, joint venture, trust, or other entity. This power may be exercised once the corporation is formed and its articles so provide.
…S. 85 (1977); Time, Inc. v. Firestone , 424 U. S. 448 (1976); Doran v. Salem Inn, Inc. , 422 U. S. 922 (1975); Southeastern Promotions, Ltd. v. Conrad , 420 U. S. 546 (1975); Cox Broadcasting Corp. v. Cohn , 420 U. S. 469 (1975); Miami Herald Publishing Co. v. Tornillo , 418 U. S. 241 (1974); New York Times Co. v.…