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Functions of Promoters

1.    Identification of Business Idea or Opportunity. The first stage in the promotion of a company is discovery of a new idea or prospection. It is the promoter who conceives an idea of starting a business for making profit. With his experience, the promoter discovers the field of gainful investment. His knowledge enables him to judge the soundness of a particular proposal. Sometimes, he has to judge the chances of success in exploiting an invention for business purpose. His experience and judgment enable him to see celery whether the invention has commercial possibilities or not. Thus, the promoter is an explorer of untraversed fields.

2.    Feasibility Study or Detailed Investigation. The second stage in the promotion of a company is detailed investigation. This is done to find out whether the business which he likes to start will be profitable or not. For this purpose, he takes the help of experts like engineers, accountants, cost accountants, market research specialists, etc. This will enable him to known the probable cost of production, the probable demand and supply of the product. On the basis of reports submitted, the promoter takes his decision. If the reports are favorable, he proceeds further with his business idea.
      Depending upon the nature of the project, the following feasibility studies may be undertaken, with the help of specialists like engineers, chartered accountants to examine whether the perceived business opportunity can be profitably exploited.

There are three kinds of feasibility studies:

(a)    Technical Feasibility. Sometimes, an idea may be good but technically not possible to execute because of non-availability of either raw material or technology.

(b)    Financial Feasibility. The promoters should identify the financial requirements in the beginning of the project.

(c)    Economic Feasibility. Sometimes, the project is technically and financially viable, but they may not be profitable.

3.    Company’s Name Approval. Having decided to form a company, the promoters have to select name for it and submit, an application to the Registrar of Companies for the state in which the registered office of the company is to be situated, for its approval. The proposed name may be approved if it is not considered undesirable. It may happen that another company exists with the same name or a very resembling name or the preferred name is misleading say such cases the proposed name is not accepted but some alternate name may be approved. Therefore, three names, in order of their priority are given in the application to the Registrar of Companies.

4.    Fixing Up Signatories to the Memorandum of Association. Promoters have to decide about the members who will be signing the Memorandum of Association of the proposed company. Usually the people signing Memorandum are also the first directors of the company. Their written consent to act as directors and take up the qualification shares in the company is necessary to be taken.

5.    Appointment of Professional. Certain professionals such as mercantile bankers, auditors, etc., are appointed by the promoters to assist them in the preparation of necessary documents which are required to be filed with the Registrar of Companies.

6.    Preparation of Necessary Documents. The promoter takes up steps to get prepared certain legal documents, which have to be submitted under the law, to the Registrar of the Companies for getting the company registered. These documents are Memorandum of Association and Articles of Associations.

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