Section 186: Duties of promoters

186. Duties of promoters (1) Until the formation of a company is complete and its working capital has been raised, every promoter shall— (a) observe utmost good faith towards the company in any transaction with it or on its behalf; and (b) compensate the company for any loss suffered by it by reason of his failure to exercise such good faith. (2) A promoter who acquires any property or information in circumstances in which it was his duty to acquire it on behalf of the company shall account to the company for such property and for any profit which he may have made from the use of such property of information. (3) Any transaction between a promoter and a company may be rescinded by the company unless, after full disclosure of all material facts known to the promoter, the transaction has been entered into or ratified on behalf of the company— (a) where no director is relative or nominee of the promoter, by the Board of directors; or (b) by all the members; or (c) by the company at a meeting of shareholders at which neither the promoter nor the holder of any shares in which he is beneficially interested shall have voted on the resolution to enter into that transaction. (4) Notwithstanding any other enactment, no period of limitation shall apply to any proceedings brought by the company to enforce any of its rights under this section, but in any such proceedings, the Court may relieve a promoter on such terms as it thinks fit from any liability under subsection (1) or (2) where in all the circumstances, including lapse of time, the Court thinks it is equitable to do so. C35 – 117 [Issue 1] Companies Act Sub-Part C – Registered Office