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§ 3. Definitions of the term.
The term promoter is not one of precise, inflexible meaning, and is hardly capable of accurate definition.
The word is defined in the English Joint Stock Companies Act of 1844 9 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
7. Ex-Mission Land & Water Co. V. Flash, 97 Cal. 610, 625–626, 32 Pac. 600, 604; Old Dominion Cop per, etc., Co. v. Bigelow, 203 Mass. 159, 177, 89 N E. 193, 40 L. R. A. N. S. 314; Emma Silver Mining Co. v. Lewis, L. R. 4 C. P. D. 396, 407.
8. First Ave. Land Co. v. Hilde brand, 103 Wis. 530, 79 N. W. 753, citing Alger on Promoters, $ 1.
9. Stat. 7 & 8 Victoria, Chap. 110, § 3, (Repealed Stat. 25 and 26 Victoria, Ch. 89). Quoted in Dick erman y. Northern Trust Co., 176 U. S. 181, 203, 20 Sup. Ct. 311, 44 L. Ed. 423. The term is also de fined in The Companies (Consolidation) Act of 1908, 8 Edward VII, Chap. 69, $ 84, subd. 5. The term is used in The Companies Act of 1867, 30 & 31 Victoria, Chap. 131, 8 38.
10. L. R. 5 Q. B. D. 109, 111, 28 W. R. 351, (1879). (Quoted in Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 119, 29 Atl. 303, 25 L. R. A. 90. 42 Am. St. Rep. 159, 47 Am. Eng. Corp. Cas. 647; The Telegraph v. Loetscher, 127 Iowa 383, 101 N. W. 773, 4 Am. & Eng. Ann. Cas. 667; Pitts v. Steele Mercantile Co., 75 Mo. App. 221, 226–227; Second Nat'l Bk. v. Greenville Screw Point Fence Post Co., 23 Ohio C. C. 274, 280). To the effect that the term is one, not of law, but of business, see Bigelow v. Old Dominion Copper, etc., Co., 74 N. J. Eq. 457, 501, 71 Atl. 153; Twycross v. Grant, L. R. 2 C. P. D. 469, 503.
11. Now Associate Justice of the United States Supreme Court.
12. 74 N. J. Eq. 457, 501, 71 Atl. 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 ior 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 16 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, 8 651.
Quoted in Dickerman v. Northern
“A person who brings about the incorporation and organization of a corporation. He brings together the persons who become interested in the enterprise, aids in procuring subscriptions, and sets in motion the machinery which leads to the formation of the corporation itself.”
§ 4. Circumstances that give rise to the relation.
There is no one circumstance, or set of circumstances, the presence or absence of which determines the existence of the relation of promoter to a corporation.
It has been said that “ whether a person is or is not a promoter is a question of fact and not of law, and must in each case be determined with due regard to all the circumstances.” 16 The statement is not entirely accurate, and probably intends nothing more than that whether a given person is, or is not, a promoter of a given corporation, must be determined by the facts of the particular case.
626, 32 Pac. 600, 604; the Telegraph v. Loetscher, 127 Iowa 383, 101 N. W. 773, 4 Am. & Eng. Ann. Cas. 667 ; South Mo. Pine Lumber Co. v. Crommer, 202 Mo. 504, 518, 101 S. W. 22, 26; Brooker v. William H. Thompson Trust Co., 254 Mo. 125, 162 S. W. 187, 194; See v. Heppen heimer, 69 N. J. Eq. 36, 71, 61 Atl. 843; Hutchinson v. Simpson, 92 N. Y. App. Div. 382, 409, 87 N. Y. Supp. 369, (dissenting opinion of Hatch, J.); Richlands Oil Co. v. Morriss, 108 Va. 288, 294, 61 S. E. 762, 764; Cox v, National Coal & Oil Investment Co., 61 W. Va. 291, 305, 56 S. E. 494, 500.
Further definitions of the term promoter may be found in Yeiser v. U. S. Board & Paper Co., 107 Fed. 340, 344, 46 C. C. A. 567, 52 L. R. A. 724; Yale Gas Stove Co. v. Wilcox, 64 Conn. 101, 119, 29 Atl. 303, 25 L. R. A. 90, 42 Am. St. Rep. 159; 47 Am. & Eng. Corp. Cas. 647; McRee v. Quitman
Oil Co., — Ga. - 84 S. E. 487; Hinkley v. Sac Oil & Pipe Line Co., 132 Iowa 396, 402, 107 N. W. 629, 631, 119 Am. St. R. 564; Armstrong v. Sun Printing & Publishing Ass'n, 137 N. Y. App. Div. 828, 830, 831, 122 Supp. 531; Bosher v. Richmond & H. Land Co., 89 Va. 455, 460, 16 S. E. 360, 362; First Avenue Land Co. v. Hildebrand, 103 Wis. 530, 534, 79 N. W. 753, 754, (citing Alger on Promoters, § 1); Erlanger v. New Sombrero Phosphate Co., L. R. 3 App. Cas. 1218, 1268, 6 Eng. Rul. Cas. 777, 39 L. T. N. S. 269, 27 Weekly Rep. 65; Twycross v. Grant, L. R. 2 C. P. D. 469, 527, 541; Emma Silver Mining Co. v. Lewis, L. R. 4 C. P. D. 396, 407; Whaley Bridge Calico Printing Co. v. Green, L. R. 5 Q. B. D. 109, 111; Watts Law of Promoters, p. 1.
16. South Missouri Pine Lumber Co. v. Crommer, 202 Mo. 504, 101 S. W. 22, citing 23 Am. & Eng. Encyc. of Law, (2nd ed.), 233.
An understanding of the scope and meaning of the term promotor can probably best be obtained by a consideration of some of the circumstances which have been held to, and some of the circumstances which have been held not to, give rise to the relation.
In the ordinary case certain persons, having conceived the idea of organizing a corporation for some more or less well-defined purpose, select the directors, take, or cause to be taken, the necessary steps in the formal organization of the corporation, procure the conveyance to the company of the properties and contract rights which they deem necessary for the carrying on of the contemplated business, and solicit subscriptions for the shares. These persons are obviously the promoters of the corporation.17 It is not, however, to constitute one a promoter of a cor
17. For cases illustrative of the circumstances which constitute the relation, see
Illinois.—Goodwin v. Wilbur, 104 Ill. App. 45, 51-52.
Massachusetts. Old Dominion Copper, etc., Co. v. Bigelow, 203 Mass. 159, 177, 89 N. E. 193, 40 L. R. A. N. S. 314; same v. same, 188 Mass. 315, 320, 327, 74 N. E. 653, 108 Am. St. Rep. 479.
New York.-Brewster V. Hatch, 122 N. Y. 349, 360–362, 25 N. E. 505, 33 N. Y. St. Rep. 527.
New Jersey.—Plaquemines Tropi. cal Fruit Co. v. Buck, 52 N. J. Eg. 219, 234, 27 Atl. 1094, 44 Am. & Eng Corp. Cas. 686; Woodbury Heights Land Co. v. Loudenslager, 55 N. J. Eq. 78, 88, 35 Atl. 436, affirmed, 56 N. J. Eq. 411, 41 Atl.
1115, but modified, 58 N. J. Eq. 556, 43 Atl. 671; Arnold v. Searing, 78 N. J. Eq. 146, 156–157, 78 Atl. 762, 766.
Ohio.-Shawnee Commercial & Savings Bank Co. v. Miller, 24 Ohio C. C. 198, 209.
V irginia.-Richlands Oil Co. v. Morriss, 108 Va. 288, 298, 61 S. E. 762.
Wisconsin.-Pittsburg Mining Co. v. Spooner, 74 Wis. 307, 42 N. W. 259, 17 Am. St. Rep. 149, 24 Am. & Eng. Corp. Cas. 1.
United Kingdom and Colonies. Twycross v. Grant, L. R. 2 C. P. D. 469, 541; Emma Silver Mining Co. v. Grant L. R. 11 Ch. Div. 918, 936, Whaley Bridge Calico Printing Co. v. Green, L. R. 5 Q. B. D. 109, 111; Erlanger V. New Sombrero Phos
poration, necessary that he should have done all of these thingsdoing some of them may be sufficient.18
The solicitation of subscriptions at any time before the corporation is fully organized, generally constitutes the solicitor a promoter,19 unless he avowedly acts under the employment of another, in which case the employer, rather than the employee, should properly be considered the promoter. The term has also been applied to one who was active in securing a charter and in constant attendance at meetings of the incorporators and directors, 20 but it is not applied to the mere signers of the certificate of incorporation.21
One who attends to the formalities of the incorporation is not necessarily a promoter. In The Telegraph v. Loetscher 22 the defendant claimed that this was all that he had done. The court took pains to show that the defendant had also exhibited to pro
phate Co., L. R. 3 App. Cas. 1218, 1283–1284, 6 Eng. Rul. Cas. 777, 39 L. T. N. S. 269, 27 Weekly Rep. 65; In re Olympia, Ltd., 1898, 2 Ch. Div. 153, 181–182; (affirmed sub nom. Gluckstein v. Barnes, 1900, App. Cas. 240); Lagunas Nitrate Co. v. Lagunas Syndicate, 1899, 2 Ch. Div. 392, 441; Re Sale Hotel & Botanical Gardens, Ltd., 78 L. T. N. S. 368; Ross v. Estates Investment Co., L. R. 3 Eq. 122, 123, affirmed, L. R. 3 Ch. App. 682.
18. Emma Silver Mining Co. V. Grant, L. R. 11 Ch. Div. 918, 936.
19. In South Joplin Land Company v. Case, 104 Mo. 572, 16 S. W. 390, 38 Am. & Eng. Corp. Cas. 333, the court laid stress upon the soll. citation of subscriptions, but the defendants had also brought the corporation into existence. See also South Missouri Pine Lumber
Company v. Crommer, 202 Mo. 504, 519, 101 S. W. 22, 26; The Tele graph V. Loetscher, 127 Iowa 383, 101 N. W. 773, 4 Am. & Eng. Ann. Cas. 667, and see Scottish Pac. Coast Min. Co., Ltd., V. Falkner, Bell & Co., Sess. Cas. 15 Rettie 290, 305. But see Thames Navigation Co. v. Reid, 9 Ont. 754, (reversed on another ground, 13 Ont. App. 303) and Milwaukee Cold Storage Co. v. Dexter, 99 Wis. 214, 74 N. W. 976, 40 L. R. A. 837.
20. Hayden v. Green, 66 Kan, 204, 71 Pac. 236.
21. St. Louis, F. S. & W. R. Co. v. Tiernan, 37 Kan, 606, 632, 15 Pac. 544, 558-559. See also Benton v. Minneapolis Tailoring & Mfg. Co., 73 Minn. 498, 506-507, 76 N. W. 265, 267-8.
22. 127 Iowa 383, 101 N. W. 773, 4 Am. & Eng. Ann. Cas. 667.