Page 27 of 98 arising from their fiducially

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Arising from their fiducially relationship with the company is the legal duty to disclose to the company any profits which he makes from the promotion. If a promoter makes a profit but does not disclose it, he must account to the company f or it. The courts have variously held that the disclosure should be to an independent board of directors. In Erlanger Vs. New Sombrero Phosphate Company, the appellant acquired the lease of an island for £55,000, a company was formed and the lease was sold to the company for £110,000. The appellant was the director of the company, the house of lords held that the company was entitled to set aside the contract and to recover the purchase money from the appellant as there was no disclosure by the promoter of the profit made. NB/ disclosure to the directors who are were nominees of the promoter will not be sufficient to relieve the promoter of liability. Remedies forthebreachofpromoters duties;-(i) Rescission (setting thecontract aside) The equitable remedy of rescission is available to the company in respect of any contract entered into as a result of non-disclosure or misrepresentation. This remedy is however, not available if the company is in liquidation. Other circumstances which may exclude rescission are;- a) Lap se of time. b) Intervention of a third party right.(rights of others who are not parties to the intial contract) c) Liability to make nestitatic in integrum –ie substantial restoring both parties to the original position. d) The courts discretion to declare the contract as subsisting and award damages in lieu of rescission. Page 28 of 98
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Damages Promoters may be liable for damages for misrepresentation inducing a contract. In Re-Jubilee cotton Mills, the promoter was held liable in damages for taking an allotment of shares in consideration for the sale of his property which was over valued. A promoter could be held liable in damages for negligent mis- statement on the principles laid down in Hedley Byrne Vs Helver C Partner Ltd. Remuneration ofpromoters. A promoter has no legal rights against the company he promotes. This is so because;- a) The company, being non-existence at the time of the promotion could not have requested for the promoter s service. There is therefore no contract between him and the company which would entitle him to sue for his expenses or professional service. b) The company could not after its incorporation, enter into contract to pay him for his services because no consideration would be furnished to it. The services rendered would be past consideration. In case of companies which have adopted Table A, Article 80 empowers the directors to pay promoters their promotion expenses. It is however a power given to the directors and confers no legal claims on the promoter.
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  • Summer '16
  • Dr. Willy
  • The Hours, Corporation, Types of companies, Limited Liability Company, Africa Company

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