Company law

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 March 2013 can anyone tell me that the preliminary expenses done by promoters get reimburse or not???? If yes then how & by which means???

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 March 2013 Promoter can get remunerations for their services in promoting the company only if there is a contract to that effect. In other words, he can recover remuneration for his services if there is a valid contract between him and the company after incorporation. But a company before incorporation cannot enter into a contract. As such the promoter is at the mercy of the directors after incorporation of the company, even for his preliminary expenses, registration fee, etc. (Re English & Colonial Produce Co.). However the Articles of a company generally contain a provision to this effect and authorise the directors to remunerate the promoters. The usual ways of paying remuneration to a promoter for his services, are as under: 1. He may be given shares in the company, as fully or partly paid up, in consideration of his services. 2. He may be given a specified sum under the Articles. 3. He may be given commission on shares sold in the company. 4. He may receive commission from vendors selling property to the company, or 5. He may sell his own property (or properly purchased by him) at a profit to the company after making full disclosure in this respect to an independent and competent Board of Directors or otherwise.

Querist : Anonymous

Querist : Anonymous (Querist)

07 March 2013 sir, thankx altt for explaining & clarity

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