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A corporate promoter is the legal term for a person who causes a Corporation to be formed, organized and financed. Sometimes the Promoter can become the so-called "incorporator," or become a shareholder, but this is not always the case.


Fiduciary Relationship


Promoters have a Fiduciary Relationship to the corporation and the shareholders. As part of this duty, promoters cannot act in secret with regard to any actions and must disclose any personal interest in their property as it may relate to its sale to the corporation.

  • Sale of Property. If the promoter (or promoters) is (are) also the only Shareholder of the corporation, it is not a breach of fiduciary duty to the corporation for sale of property from the Commission, SEC , because Rule 10b-5 includes special provisions for deceit and fraud.


  • Property Owned Before Incorporation. If promoters do not adequately disclose their interest in property prior to incorporation, the corporation may later either (a) choose to terminate the transaction involving promoter-owned property, or (b) may seek reimbursement to the corporation by the promoter for the difference between market value of the property and the inflated price (if any) for the property sold to the corporation. These are also called "secret profits."


  • Property Owned After Incorporation. If the promoter obtains property after undertaking the promotion activity, the measure of damages is the difference of actual cost for the property and the inflated Sale Price .