The term “promoter” is not defined in the Corporations Act 2001 (Cth) (“Corporations Act”). Generally, a promoter is a person who is directly or indirectly involved in the incorporation or float of a company. This does not include persons acting in a purely ministerial or professional capacity.

A promoter is in a fiduciary relationship with the company which is formed. As such, promoters must act in the best interests of the company and avoid placing themselves in a position where there is a real sensible possibility of a conflict between their duty and their personal interest.

Promoters are duty bound to disclose any personal interest in a transaction involving the company. Disclosure must be full and frank and must ordinarily be made to an independent board of directors. Where a promoter fails to adequately disclose, the company may, generally speaking, rescind a contract with the promoter or sue to recover any undisclosed profits.

In addition to the common law, promoters of public companies are governed by regimes under the Corporations Act and the ASX Listing Rules. For example, the statutory regime requires a prospectus to make certain disclosures regarding the interests of the issuing company’s promoters. Further, the ASX Listing Rules prohibit the transfer, for a specified time, of shares issued to promoters.

See Promoters.

Before a company is registered, it cannot be a party to any contract. A pre-registration or pre-incorporation contract is a contract that a person enters on behalf of, or purportedly on behalf of, or for the benefit of a company before it is registered.

The Corporations Act 2001 (Cth) (“Corporations Act”) enables a pre-registration contract to be ratified by a company after it is incorporated (thereby binding the company).

The Corporations Act imposes liability on the person to compensate the third party for loss suffered because a registered company does not ratify the contract or fails to perform its obligations under a ratified contract.

Regarding such liability, the person may seek a release from the third party but has no right of indemnity against the company.

Where a registered company does not subsequently ratify the contract, the court may make any orders it considers appropriate in the circumstances, including ordering the company to take certain actions.

Any rights or liabilities anyone would otherwise have on the pre-registration contract are replaced by those provided for in the Corporations Act.

See Pre-registration contracts.