Promotion involves organizing funds, property, and management ability to start a new business for profit. A promoter conceives the idea and leads the formation work. Key promoter functions include selecting a suitable location, planning facilities, establishing financial and management structures, and handling legal formalities. The promotion process typically involves discovering an opportunity, investigating its viability, assembling required elements, financing the initial work, and presenting the plan to investors who can launch the business. In India, promotion historically involved managing agencies that handled incorporation and initial management in addition to typical promoter duties.

1. PROMOTION

2. DEFINITION
•Gersteberg defines promotion as “the discovery of
business opportunities and subsequent organisation of
funds, property and managerial ability into a business
concern for the purpose of making profits from the newly
floated enterprise.”

3. PROMOTERS
•A Promoter is a person who conceives the idea of forming a
company. He acts as a pioneer, creator, and leading spirit in
the company formation work. It is a term of business and we
may summarize the main functions of company promoters
to illustrate the scope of their activities.

4. Functions of promoters
• 1. Location and size of the business or industrial unit after carefully
scrutinising the factors of location such as availability of raw materials, power
and labour supply, and other requisites such as transport and banking facilities
and easy access to markets; at present in many big cities an industry can be
started only in a specific industrial area declared by the states.
• 2. Planning of building, factories, capital equipment, plant, machinery etc.,
• 3. Nature and type of managerial control, i.e., selection of first directors,
managerial control to be vested in managing directors.
• 4. Preparation of capital or financial plan, question raising the capital through
loans and shares.,

5. 5.Legal formalities like securing of a necessary license,
foreign exchange for importing plant and machinery (
sometimes through foreign collaboration) permits, etc., and
the legal formalities relating to the issue of prospectus,
certificates of Incorporation and commencement of
business,
6. negotiation of company contracts, e.g., purchase of
assets, underwriting contract etc.,
7. Advertisement and publicity of new project by prospectus
or otherwise.

6. Stages in Company Promotion Work
• The company promotion work (in western countries) may be divide into the
following stages:
• 1. Discovery: Discovery of idea or invention of new process, new product
etc., may take place. A syndicate may be formed to develop the ides or patient
till it is ripe for mass-scale production.
• 2. Investigation: Detailed investigation to confirm the commercial prospects
of the new idea or invention will be undertaken. Hidden weakness, if any, will
have to be ascertained. Opinions of financial experts will be taken with
reference to capital cost, operating cost and probable earning power.
Similarly, experts may be approached to advise on the problems of location of
plant, production (engineering aspects) channels of distribution, demand for
the new products, management and finance.

7. • 3. Assembling of Business Elements: Preliminary work of assembling of business
elements and factors of production – land. Labour, capital, organisation, etc., e.g.,
Acquiring of property and assets, underwriting of new managerial control, drafting of
legal documents and contracts etc.,
• 4. Provision of finance: Every enterprise requires adequate finance. The cost of
financing up to the point when the final proposition is presented to the capitalists
should be borne by the promoters himself. If the project suffers a failure, the promoter
will naturally incur a loss. But if the project is successful, the promoters will of course,
make a good profit. Finance is also required to acquire fixed assets and to provide for
adequate working capital.
• 5. Presentation of plan: Professional company promoters usually sell the concrete
plan of joint-stock enterprise magnates and industrialists who after agreeing to form a
company will themselves undertake further duties regarding registration of the
company, issue of prospectus, allotment of shares, trading certificate etc., and who will
also be responsible to nurse the new enterprise in its infant stage. Once the plan is sold
to these businessmen, the company promoter will disapear from the scene and he may
embark upon a new project.

8. Company Promotion in India
• The company promotion work in India till recently was monopolised by
managing agency houses, directors and partners of the old firm. We do not
have any professional or specialised agencies exclusively concentrating on
the company promotion work in the private sector of our economy. The
National Industrial Development Corporation, a specialist promoting
institution, was started in 1954 to prepare project reports for a number of
industrial units- manufacturing of industrial machinery, for drugs,
dyestuffs, plastic etc., it has also helped modernisation and rehabilitation of
jute and cotton textile industries.

9. • The company promoters in India follow, in general, the standard stages in
company promotion mentioned above. But they also undertake additional
work such as company incorporation and formation work, underwriting of
shares, substantial share contributions and above all direct charge of routine
management of business.
• Thus, all the subsequent work performed by business magnates in Western
countries, after purchasing the concrete plan from professional company
promoters, is fully shouldered by Indian Promoters and unlike Western
promoters, they act as managers and controllers of the new companies. In
order to retain full voice in the management and control, they often keep
under their ownership a necessary block of shares to ensure their controlling
interest in the affairs of the company. Many a time, promoters in India also act
as company underwriters.