ExpertMedium1 markMultiple Choice
Syllabus D: The formation and constitution of business organisationsSection ACorporate and Business Law
ACCA · Question 32 · Syllabus D: The formation and constitution of business organisations
A promoter of a company owes fiduciary duties to the unformed company. Which of the following is a key duty of a promoter?
A promoter of a company owes fiduciary duties to the unformed company. Which of the following is a key duty of a promoter?
Answer options:
A.
To guarantee the company's future debts.
B.
To disclose any secret profits made during the promotion of the company.
C.
To purchase shares in the company upon incorporation.
D.
To act as the first director of the company.
How to approach this question
Identify the fiduciary obligations of someone setting up a company.
Full Answer
B.To disclose any secret profits made during the promotion of the company.✓ Correct
A promoter stands in a fiduciary relationship with the company they are forming. This means they must act in good faith, avoid conflicts of interest, and crucially, disclose any profits they make from transactions involving the company. Failure to disclose secret profits allows the company to rescind the contract or sue for the profit.
Common mistakes
Confusing the role of a promoter with the role of a guarantor.
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