A promoter is a person who starts up a business, particularly a corporation, including the financing. The formation of a corporation starts with an idea. Preincorporation activities transform this idea into an actual corporation. The individual who carries on these preincorporation activities is called a promoter. Usually the promoter is the main shareholder or one of the management team and receives stock for his/her efforts in organization. Most states limit the amount of "promotional stock" since it is supported only by effort and not by assets or cash. If preincorporation contracts are executed by the promoter in his/her own name and there is no further action, the promoter is personally liable on them, and the corporation is not.
Under the Federal Securities Act of 1933, a pre-organization certificate or subscription is included in the definition of a security. Therefore, a contract to issue securities in the future is itself a contract for the sale of securities. In order to secure an exemption, all stock subscription agreements involving intrastate offerings should contain representations by the purchasers that they are bona fide residents of the state of which the issuer is a resident and that they are purchasing the securities for their own account and not with the view to reselling them to nonresidents. A stock transfer restriction running for a period of at least one year or for nine months after the last sale of the issue by the issuer is customarily included to insure that securities have not only been initially sold to residents, but have "come to rest" in the hands of residents.
A South Dakota Preincorporation Agreement between Incorporates and Promoters is a legally binding document that outlines the terms and conditions agreed upon by the parties involved in the process of forming a corporation in South Dakota. This agreement is typically drafted and executed before the actual incorporation process takes place. Key elements included in a South Dakota Preincorporation Agreement between Incorporates and Promoters may consist of: 1. Incorporated Information: The agreement identifies the individuals or entities that will serve as the incorporates and promoters of the corporation. 2. Corporation Name: The proposed name of the corporation is specified, along with any alternative names, to ensure availability and compliance with South Dakota state laws. 3. Purpose of the Corporation: The agreement defines the intended activities, objectives, and goals of the corporation to provide clarity on its primary business focus. 4. Capital Contribution: This section outlines the initial capital that each incorporated will contribute to the corporation, specifying the form (cash, assets, or services) and the value of the contributions. 5. Ownership Structure: The agreement establishes the ownership structure of the corporation, including the number of shares each incorporated will initially hold and any restrictions on transfer or sale of shares. 6. Board of Directors and Officers: The roles and responsibilities of the board of directors and officers are outlined, including the method of selection, terms of service, and compensation (if applicable). 7. Decision-Making Process: The agreement defines the decision-making process for key corporate matters, such as major financial decisions, mergers, acquisitions, or dissolution. 8. Management and Operations: The agreement may address the day-to-day management and operations of the corporation, including decision-making authority, hiring practices, and financial management processes. 9. Intellectual Property Rights: If necessary, this section addresses the ownership, protection, and licensing of intellectual property associated with the corporation. 10. Dissolution or Termination: The circumstances under which the corporation may be dissolved or terminated are outlined, including any procedures for liquidation and distribution of assets. It is important to note that there may be variations in the structure and content of a Preincorporation Agreement depending on the specific needs, preferences, and industry of the incorporates. Additionally, different terms or provisions may be customized as per the requirements of South Dakota state law. Overall, a South Dakota Preincorporation Agreement between Incorporates and Promoters sets forth the framework and guidelines for the formation and functioning of a corporation, ensuring clear communication, consensus, and legal protection among all parties involved in the initial stages of incorporation.
