16. The same subject.-Purchase of property with view to resale

to corporation.

17. The same subject.-Taking step in organization of cor-
poration.

18. The same subject.-An illustrative case.

19. Termination of the relation,

§ 1. Introductory.

Some preliminary steps in the organization of a corporation must necessarily be taken before a certificate of incorporation is prepared and signed, and further steps are necessary before the

company can have directors, officers, or agents, capable of representing and acting for it. A corporation might, it is true, be organized without any action being taken prior to the signing and filing of the certificate of incorporation, other than the preparation thereof. The further steps necessary for the complete legal organization of the company might be carried on by the incorporators, and all questions as to the business to be conducted by the company, the properties to be acquired by it, and the method of raising the necessary capital, could be left to the future determination of the directors when qualified. In practice, however, a corporation is organized for the purpose of carrying on some particular business, and the scope of this business, the properties to be acquired, the method of raising capital, and other matters, are agreed upon before any move toward the legal organization of the corporation is made. The negotiations relative to the molding of the contemplated company are therefore carried on by persons who, whatever their subsequent relation to the corporation, are, at the time, neither directors, officers, agents, nor even incorporators of the company. These preliminary negotiations involve matters of great importance to the future corporation and its stockholders, and many and difficult questions of law result therefrom. A designation for the persons by whom these negotiations are carried on is a matter of necessity. The term now in general use is "promoter."

§ 2. Judicial acceptance of the term promoter.

The complete judicial acceptance of this term “ promoter" is a matter of comparatively recent date. In some of the early cases, persons engaged in the formation of a corporation are spoken of as its "projectors." 1 Other cases of about the same

1. Blain v. Agar, (1826) 1 Sim. 37, 5 L. J. Ch. 1; Society for Practical Knowledge v. Abbott, (1840)

2 Beav. 559; Foss v. Harbottle, (1843) 2 Hare 461, 489; Edwards v. Grand Junction Ry. Co., (1836)

period, though recognizing the obligations flowing therefrom, do not give any name to the relation in which such persons stand to the contemplated company.2

The word promoter, while undoubtedly employed in common parlance before that time, does not seem to have been used in any reported decision until after it had been used, and for the purposes of the act defined, in the Joint Stock Companies Act of 1844.3

"I dislike the use of the word 'promoter,'" said Lord Justice Cotton, as late as 1887. The word had, however, been judicially recognized before that time, even in the House of Lords.5

Lord Justice Lindley in his work on Companies Law, published in 1889, said, "There has been considerable discussion with reference to the meaning of the word promoter, and also with reference to his relation to the company he is endeavoring to form. The word itself has never been defined; but it is used in common parlance, and also in Section 38 of the Companies act, 1867, to denote those persons who bring the company into existence, by taking an active part in forming it, and in procuring persons to join it as soon as it is technically formed."

1 Mylne & Cr. 650, 672, 7 Sim. 337; Preston v. Liverpool Manchester, etc., Ry. Co., (1851) 1 Sim. N. S. 586, 7 Eng. Law & Eq. 124, 21 L. J. Ch. N. S. 61.

Hawkes, (1855) 5 H. L. Cas. 331, 856; Caledonian, etc., Ry. Co. v. Magistrates of Helensburgh, (1856) 2 Macq. 391, 407, 2 Jur. N. S. 695; Tyrrell v. Bank of London, (1862) 10 H. L. Cas. 26, 11 Eng. Rep. 934; See also Reynell v. Lewis, (1846) 15 M. & W. 517, 528; In re AngloGreek Steam Co., (1866) L. R. 2 Eq. 1, 35 Beav. 399; Twycross v. Grant, (1877) L. R. 2 C. P. D. 469. 4. Ladywell Mining Co. 6. Lindley on Companies Law, Brookes, L. R. 35 Ch. Div. 400, 411, 5th ed., (1889) 346; 6th ed., Vol. 1,

2. Hichens v. Congreve, (1828) 4 Russ. 562; same v. same, (1829) 1 R. & M. 150; same v. same, (1831) 4 Sim. 420, 427.

3. Stat. 7 and 8 Vict., Ch. 110, § 3.

17 Am. & Eng. Corp. Cas. 22.

V.

5. Eastern Counties Ry. Co. v.

p. 481.

The term promoter is not one of precise, inflexible meaning," and is hardly capable of accurate definition.8

The word is defined in the English Joint Stock Companies Act of 1844 as applying " to every person acting by whatever name in the forming and establishing of a company at any period prior to the company obtaining a certificate of complete registration.' The word is here defined only for the purposes of the act, and the definition is inadequate for general purposes.

The court in Whaley Bridge Calico Printing Co. v. Green 10 aptly says, "The term promoter is a term not of law, but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence."

"A promoter," said Chancellor Pitney,11 in the recent case of Bigelow v. Old Dominion Copper, etc., Co.,12 "is one who seeks

opportunities for making advantageous purchases and profitable investments in industrial or other enterprises, who interests men of means in such a project when found, organizes them into a corporation for the purpose of taking over the project, and attends upon the newly-formed company until it is fully launched in business. He may be stockholder, director, officer, or none of these. His services begin before the company is formed, and ordinarily are not concluded until some time after its formation.”

The Supreme Court of Massachusetts, considering the meaning of the term in a subsequent phase of the same litigation,13 said: "In a comprehensive sense promoter' includes those who undertake to form a corporation and to procure for it the rights, instrumentalities and capital by which it is to carry out the purposes set forth in its charter, and to establish it as fully able to do its business. Their work may begin long before the organization of the corporation, in seeking the opening for a venture and projecting a plan for its development, and may continue after the incorporation by attracting the investment of capital in its securities and providing it with the commercial breath of life.” The term has also been defined 14 as meaning "A person, who, by his active endeavors, assists in procuring the formation of a company and the subscription of its shares. The

word 'promoter' has no technical legal meaning and applies to any person who takes an active part in inducing the formation of a company, whether he afterwards becomes connected with the company or not.”

Another definition frequently quoted 15 defines a promoter as

13. Old Dominion Copper, etc., Co. v. Bigelow, 203 Mass. 159, 177, 89 N. E. 193, 40 L. R. A. N. S. 314.

14. Morawetz on Corporations, (2nd ed.), § 545. Quoted in ExMission Land & Water Co. v. Flash, 97 Cal. 610, 32 Pac. 600.

15. Cook on Corporations, § 651.

Quoted in Dickerman v. Northern
Trust Co., 176 U. S. 181, 203, 20
Sup. Ct. 311, 44 L. Ed. 423; Moore
v. Warrior Coal & Land Co., 178
Ala. 234, 59 So. 219; Burbank
v. Dennis, 101 Cal. 90, 97, 35
Pac. 444, 446; Ex-Mission Land &
Water Co. v. Flash, 97 Cal. 610,