The New International Encyclopædia/Promoter

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PROMOTER (ML. promoter, from Lat. promovere, to promote, push forward, from pro, before, for + movere, to move, Skt. mīv, to push). One who urges or assists in the organization of corporations or joint-stock companies. A promoter commonly makes the plans for the business operations to be carried on, estimates the possible profits, solicits subscriptions to the stock of the proposed corporation, and, in short, does all he can to bring about its organization. A promoter is held to stand in a fiduciary relation to the prospective company. Accordingly, he is held to a very strict accountability as to his motives and as to any profits he may endeavor to make out of the proposed organization. Unless he discloses to the subscribers for stock the amount of profits he intends to make by effecting the organization, or by selling the company any lands or things of value, he must account to them for what he receives. If a promoter makes fraudulent misrepresentations as to the prospects of the intended corporation, any subscriber deceived thereby may cancel his subscription, and may recover any damages he may sustain from the promoter. If a person urges others to form a company and buy something he has to sell, and does not himself become identified with the organization, he is not a promoter in the above sense, and may obtain the best price he can induce the company to pay for his property. A corporation, when organized, is not liable for any ‘contracts’ entered into on its behalf by the promoter prior to its organization. It cannot ratify them, but may ‘adopt’ them, but this amounts to making a new contract. A promoter may sometimes be held personally liable on such contracts. See Thompson, On Liability of Directors and Other Officers and Agents of Corporations (Saint Louis, 1880); and consult the authorities referred to under Agent; Contract; Corporation.