A promoter acts on behalf of a corporation before it is formed. The promoter may be, but doesn't have to be, the same person as the corporation's incorporator. The corporation will not be liable for any contracts entered into by the promoter on its behalf prior to incorporation unless it adopts the contract, either by direct action of the board of directors, or through implied action, by accepting the benefit of the contract. The promoter remains personally liable for pre-incorporation contracts he enters into, even after corporate adoption, unless and until there has been a novation. The promoter usually enters into a contract with the corporation it is promoting outlining the terms of compensation and rights of the promoter, including future shares in the corporation, known as promotional stock. The promoter owes the corporation it is promoting the duties of good faith and loyalty and must disclose to and gain the corporation's consent for any profits the promoter endeavors to make for himself in the process of promoting the corporation.
Definition from Nolo’s Plain-English Law Dictionary
A person who puts together a new business, particularly a corporation, including the financing; an organizer of a new venture. Usually the promoter is the principal shareholder and receives shares of promotional stock for organizing the corporation.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:22 pm