ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company
Dana is arranging the incorporation of a new company, Brightline Ltd. She has found premises, negotiated a supply contract in the company's intended name and prepared the incorporation documents. Which of the following best describes Dana's legal position as a promoter?
A promoter has a fiduciary relationship with the company being formed and must not make a secret profit. The company does not yet exist, so she cannot be its agent, but duties are still owed to it once formed and she must disclose any profit.
- AShe stands in a fiduciary relationship with the company and must not make a secret profit from the promotionCorrect
- BShe is an agent of the company from the time she begins the preparatory work
- CShe owes no duties to the company because it does not yet exist
Explanation
A promoter undertakes the tasks of forming a company and owes fiduciary duties to it, including disclosing any profit made from the promotion. The company cannot be principal before it exists, so a promoter cannot be its agent. The claim that no duties are owed is wrong because the duties are owed to the company once it is formed.
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