Who is a Promoter? | Explained by Rishabh Gaur Sir (CA Foundation - Company Law)

Who is a Promoter? | Explained by Rishabh Gaur Sir (CA Foundation – Company Law)

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In the world of company law, understanding the role and liability of a promoter is absolutely essential. Rishabh Gaur Sir (IGP’s Faculty), known for his dynamic and example-driven teaching style at IGP CA Foundation Classes, breaks down Section 2(69) of the Companies Act, 2013, which defines the term “Promoter,” using real-life logic, quirky comparisons, and courtroom-style storytelling.

Table of Contents

Section 2(69) – The Legal Definition of Promoter

The term “Promoter” has been clearly defined in Section 2(69) of the Companies Act. But why was a definition even needed? Because without a legal boundary, anyone could escape liability by claiming, “I just gave the idea!”

“Means” = Exhaustive Definition

When the law uses “means” in the definition, it becomes an exhaustive list — meaning only those mentioned under this clause can be considered promoters. No outside interpretation!

The Three Ways Someone Becomes a Promoter

As per Section 2(69), a person is a Promoter if:

Named as a Promoter in the prospectus or annual return (filed under Section 92).
Has control over the affairs of the company, directly or indirectly.
In accordance with whose advice, directions, or instructions the Board of Directors is accustomed to act.

Let’s break these points down with Rishabh Gaur Sir’s examples.

1. The “Idea Guy” – Where It All Starts

Sir humorously starts by saying:

“Promoter woh hota hai jiske dimag mein bulb jalta hai!“

He’s the person with the idea. For example:

“Main ek aisi cycle banaunga jo electricity se chalegi!”
He then gathers people to invest, and in return, they get shares.

So, he’s the one initiating the company, arranging capital, and forming the blueprint.

2. Who Signs the Papers? Who Files False Docs?

Sir says:

“Agar aapne company form karte samay koi galat information di, to promoter hi fasega — jail jaega!”

If any false or misleading documents are filed during incorporation (Section 7), the promoter is liable under Section 447 for fraud.

Example:

Someone uses fake ID proof.
If caught, the promoter, not the shareholder or a random director, will be held liable.

Promoter = the brain + the hand behind incorporation.

3. Shareholders, Members, Directors — Who’s Really in Charge?

Sir simplifies the hierarchy:

“Company chalane ke liye teen log chahiye — Promoter, Member, and Director.”

But remember:

Shareholders come only after the company is formed.
Directors are appointed by the promoter to run operations.
So, the promoter is the original mastermind.

4. Who Will Be Held Responsible?

Sir explains how legal responsibility is traced:

“Saat log mein se sabse kam shanaam insaan ko fasa denge… bolenge idea iska tha!”

If the company goes rogue, they’ll trace back to the promoter, even if he made someone else sign papers.

Example:

You put your dadaji’s name as promoter.
Or you make your wife the major shareholder.
You appoint your driver as director under undue influence (referencing Section 16, Indian Contract Act).

Still, the real brain behind the curtain will be held liable.

5. Control-Based Promoter

You can be considered a promoter even if:

You hold 90% shares, but show your wife holding 10% and she’s listed as the promoter.
You give advice/directions behind the scenes.

If the company runs as per your instructions, you are the promoter, even if your name isn’t mentioned anywhere!

6. Exception: Professionals Aren’t Promoters

What if the Board acts on a CA or CS’s advice?

Sir clarifies:

“Agar professional capacity mein advice diya gaya hai — CA, CS, CMA, Advocate, Banker — unko promoter nahi mana jaega.”

So, professional advisors are excluded, even if their advice is followed.

Real-Life Style Example: Gauri Khan & Pathaan

Sir adds a pop culture reference:

“Produced by Gauri Khan” — means she’s the promoter of that production company.
Even if SRK gave her the money!

It’s about who is on paper, who gave instructions, and who controls operations.

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Section 447 – Fraud Punishment

If any misstatement, concealment, or false declaration is made at the time of incorporation — the promoter gets booked under Section 447, with harsh penalties.

“Promoter fasega, director fasega — jinhone galat declaration di!”

Key Takeaways – What You MUST Remember

Rule	Example
1. Named in prospectus or annual return	“Rishabh Gaur” written in either = Promoter
2. Controls the company (as shareholder or otherwise)	Has 90% shares but hides behind wife
3. Board acts on instructions	Gave direction to director, even if off-record
EXCEPTION: Professionals not liable	Advice by CA or CS not counted

Final Thoughts by Rishabh Sir

“Promoter banna hai? Soch samajh kar banna! Agar company ne kuchh ulta kiya, toh sabse pehle jiska naam hai – usko hi pakdenge!”

Exam Relevance (CA Foundation)

Section 2(69) – Definition of Promoter
Section 7 – Incorporation process
Section 92 – Annual Return
Section 447 – Punishment for Fraud
Section 16 (Indian Contract Act) – Undue Influence

Learn From the Best at IGP Classes:

This explanation is part of Rishabh Gaur Sir’s legendary lectures at IGP Classes for CA Foundation Law. His examples are not just memorable, but also exam-oriented, logical, and rooted in real-world application.