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The promoters have certain basic duties towards the company formed :-1. He must not make any secret profit out of the promotion of the company. Secret profit is made by entering into a transaction on his own behalf and then sell to concerned property to the company at a profit without making disclosure of the profit to the company or its members. The promoter can make profits in his dealings with the company provided he discloses these profits to the company and its members. What is not permitted is making secret profits i.e. making profits without disclosing them to the company and its members.
2. He must make full disclosure to the company of all relevant facts including to any profit made by him in transaction with the company.
In case of default on the part of the promoter in fulfilling the above duties, the company may: -
1. Rescind or cancel the contract made and if he has made profit on any related transaction, that profit also may be recovered
2. Retain the property paying no more for it then what the promoter has paid for it depriving him of the secret profit.
3. If these are not appropriate (e.g. cases where the property has altered in such a manner that it is not possible to cancel the contract or where the promoter has already received his secret profit), the company can sue him to for breach of trust. Damages up to the difference between the market value of the property and the contract price can be recovered from him.
2. He must make full disclosure to the company of all relevant facts including to any profit made by him in transaction with the company.
In case of default on the part of the promoter in fulfilling the above duties, the company may: -
1. Rescind or cancel the contract made and if he has made profit on any related transaction, that profit also may be recovered
2. Retain the property paying no more for it then what the promoter has paid for it depriving him of the secret profit.
3. If these are not appropriate (e.g. cases where the property has altered in such a manner that it is not possible to cancel the contract or where the promoter has already received his secret profit), the company can sue him to for breach of trust. Damages up to the difference between the market value of the property and the contract price can be recovered from him.
