PROMOTION OF COMPANIES AND PRE-INCORPORATION CONTRACTS

Promotion activities deals with Promoters of a company. This can be found under section 61 of CAMA.
The idea of forming a company is usually conceived by a person or group of persons who in furtherance of this idea, will begin to take necessary steps to incorporate the company. For example, they may have to source for funds, find directors, acquire properties, prepare the prospectus and may also have to pay for the printing and all other expenses incidental in bringing the company into the world. The law regard such persons as promoters of the company.
The provisions of section 61 of CAMA provides thus:





“Any person who undertakes to take part in forming a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose, or who, with regard to a proposed or newly formed company, undertakes a part in raising capital for it, shall, prima facie be deemed a promoter of the company:
Provided that a person acting in a professional capacity for persons engaged in procuring the formation of the company shall not thereby be deemed to be a promoter.”
What this proviso means is that a solicitor or valuer does not become a promoter merely by acting in a professional capacity to a promoter. The only exception is where a solicitor negotiates property for the proposed company at a profit. In Twycross v. Grant (1877) 2 CPD 469 at 541, Cockburn C.J said that:
In “a promoter is one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose. They framed the scheme; they not only provisionally formed the company but also were to the end its creators. They found the directors and qualified them. They prepared the prospectus, they paid for the printing and advertise the undertaking before the world....”
Adeniji v. Starcola Ltd. (1972) 1 SC 202, Kazeem J. described a promoter as:
“Any person who undertakes to take part in forming a company or who with regard to a proposed or newly formed company undertakes a part in raising capital for it is prima facie a promoter of the company provided he is not acting in his professional capacity.”

It should be noted that a promoter is also someone who instructs a solicitor to prepare a Memorandum and Articles of Association and register a company for him. In Spicer (Keith) Ltd. v. Mansell (1970) 1 WLR 333, the Court held that a person who purchased a property expressly as trustee for an intended company would by so doing be deemed a promoter.
A person may become a promoter of a company even after registration of a company. For example, if he had assisted in procuring capital for the company to pay promotion expenses when the company was newly formed.
It should be noted also that an existing company may be a promoter for another new company.
However, a solicitor who prepared the Articles and Memorandum of Association and registered a company for his client who paid him (the solicitor) his professional fees is not a promoter. In RE: Great Wheal Poolgooth Ltd (1883) 53 LJ CH 42, the Court said inter alia that a solicitor who drafts the Memorandum and Articles of Association in line with the promoters instructions and the accountant who values the assets of a business to be purchased are only giving expert or professional assistance to the promoters and will be paid for their services; they are not promoters.
If, however, the solicitor and accountant did more by way of helping his client to obtain directors for the company, they would be regarded as promoters. The law looks at the facts in determining whether or not a person is a promoter. In the case of GLUCKSTEIN V. BARNES (1900) AC 240 the court held that a person who purchased property for his own use and later decided to form a company to acquire the property became a promoter only from the time when he took steps to form the company.
A promoter cannot be regarded as an agent or trustee of a company but he occupies a fiduciary relationship with the company – Garba v. Sheba International (Nigeria) Ltd. [2002] 1NWLR (Pt.748) 372 at 401.
It should be noted that a person becomes a promoter from the very moment he begins to take part in forming a company or in setting it going.

CONTRACTS OF PROMOTERS
In contrast to the Common law rule, Section 72 of CAMA provides that a contract or other transaction purporting to be entered into by the company or by any person on behalf of the company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it has been in existence at the date of such contract or other transaction and had been a party thereto.

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