A Critical Study on Accountability of Promoters in India

Abstract

The term “promoter” is commonly accepted by the general public, as a person who is involved in the process of selling a product at the market level. The study is carried out by the data collected from the various people in the public irrespective of their qualification or other requirements through random sampling. The study mainly focuses on the main research problem, is the promoter a vulnerable person when compared to other managerial officials because even after they have been removed from their role the liabilities are imposed on them for the act which they have not intended to do. The promoter is used as an intermediary in the creation of the company and they do not possess the ownership right in the full process of creation of the company. The promoters are given the full power to take necessary steps in the creation of the business without affecting the subscribers and the common public harmony, if they are not following then the liability can be imposed on them. The study found that even if there is a mistake or deceitful act on behalf of any one or all of the officials who performs the managerial function, the promoter is made liable for it even after his role has been ended. The study concludes that the legislature has to make amendment in sections of the Companies Act, 2013 dealing with imposing the liability on the promoters even after he or she is removed from his role.The present work is an attempt to analyze the existing law on the liabilities and obligations imposed on these controlling shareholders who in India are majorly promoters with the help of empirical study as per market capitalization. Further an attempt has been to look into the lacunas which exist in the above-mentioned laws such as the securities law and the Companies Act, 2013 and to suggest measures to curb abuse of power by them.