Duty of disclosure of promotors meaning

In company formation practice, the duty of disclosure of promoters requires those who organise and set up a company to make full and frank disclosure to the company and prospective shareholders of any interest, profit or conflict in transactions to which the company is, or will become, a party. This duty arises from the promoter’s fiduciary relationship with the company in embryo and is established by case law (e.g. Erlanger v New Sombrero Phosphate; Gluckstein v Barnes), rather than by comprehensive statute. Disclosure must be made to an independent board or to all existing or intended shareholders; disclosure to a board controlled by the promoters is insufficient. With fully informed consent, the transaction may proceed; absent disclosure, the company may rescind and/or claim an account of profits or equitable compensation for secret profits or self‑dealing. The duty runs from the outset of promotion until control passes to an independent board and shareholders can ratify. Usage and effect are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, where “promoter” is a descriptive, common‑law term used in company law, corporate finance and prospectus contexts, and is distinct from statutory directors’ duties under the Companies Acts.