Page 2 - Lesson Note 8

Function of promoter (Promotion stage)https://www.youtube.com/watch?v=Ax-Ac8CGtIM

1. Identification of business opportunity •
The opportunity may be in respect of producing a new product or service or making some
product available through a different channel or any other opportunity having an
investment potential. Opportunity is then analyzed for its technical and economic
feasibility.

2. Feasibility studies

It may not be feasible or profitable to convert all identified business opportunities into real projects.

The promoters, therefore, undertake detailed feasibility studies the following feasibility studies may be
undertaken:

Technical feasibility: an idea may be good but technically not possible to execute. It may be so because
the required raw material or technology is not easily available o

Financial feasibility: Every business activity requires funds. The promoters have to estimate the fund
requirements for the identified business opportunity. If not able to arrange funds, then project needs to
be given up o

Economic feasibility: Project is technically viable and financially feasible but the chance of it being
profitable is very little.

3. Name approval • The promoters have to select a name for it and submit, an application to the
registrar of companies of the state in which the registered office of the company is to be situated, for its
approval • Proposed name is not accepted but some alternate name may be approved. Three names in
order of their priority are given in the application to the Registrar of Companies

4. Fixing up Signatories to the Memorandum of Association: Promoters have to decide about the
members who will be signing the Memorandum of Association of the proposed company. People
signing memorandum are also the first Directors of the Company. Their written consent to act as
Directors and to take up the qualification shares in the company is necessary.

5. Appointment of professionals:

Certain professionals such as mercantile bankers, auditors etc., are appointed by the promoters to assist
them in the preparation of necessary documents which are required to be with the Registrar of
Companies