Promoter

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Ankit Kr. Sharma (Querist)
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19 November 2011 Dear Sir,

I want to know that what are the duties, rights and liabilities of a promoter(subscriber to the memorandum)? If promoter feels his name is being misused as he is promoter and shareholder holdiing more than 10% shares?

CS Pawan Kumar Baid

CS Pawan Kumar Baid (Expert)
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21 November 2011 Promoter does not have any right, except as provided in AoA.

However, he will attract liabilities under different provisions of Companies Act, for any breach of duty, mis-statement or negligence. He will attract civil as well as criminal liabilities. Refer Sec 62 and 63 of companies act.

Apart from companies act, SEBI also imposes liability on promoter.

Ankit Kr. Sharma

Ankit Kr. Sharma (Querist)
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21 November 2011 Mr. Pawan ji

Actually my question is "if after incorporation company will misuse their Promoter's Name for granting loan or any other thing, then what can promoter do here?"

CS Pawan Kumar Baid

CS Pawan Kumar Baid (Expert)
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21 November 2011 They have to disclaim their liabilities by making proper disclosure as and when they become aware of fraud. Else they will be held liable.

Ankit Kr. Sharma

Ankit Kr. Sharma (Querist)
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21 November 2011 Thank You very much.But I have more question?

Promoter neither participating in Management nor actively engaged in any activity since the incorporation of company? Is he liable throughout the lifecycle of the company and If,yes then why?
And to whom he disclaim his liability?

CS Pawan Kumar Baid

CS Pawan Kumar Baid (Expert)
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21 November 2011 See ! Companies Act defines the term "Officer in default" in which promoter is not included. The word "Promoter" has not been even defined in the Act. Hence under companies act, he is not liable But SEBI treats promoter liable.

To escape liability, he should give a public notice and even exclude himself to be promoter.

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