Promoters, Prospectuses, Securities Offerings and Capital Raising
Promoters
A promoter is a person who takes the initiative in forming and floating a company (Twycross v Grant). Professionals acting only in their professional capacity are not promoters. Promoters are fiduciaries: no secret profit, full disclosure to an independent board (Erlanger v New Sombrero Phosphate Co), and disclosure of interests in the prospectus. Remedies: rescission, account of profits, damages for misrepresentation.
Prospectuses and capital raising
A prospectus is any notice, circular or advertisement inviting the public to subscribe for securities. CAMA requires it to be dated, registered with the CAC, and to contain the prescribed particulars (directors, promoters' interests, share capital, material contracts, reports). Public offers also require SEC approval under the Investments and Securities Act and, if listed, NGX approval. A private company cannot offer its securities to the public; it may raise by private placement, and by crowdfunding under SEC rules. Misleading statements expose directors, promoters and experts to rescission and compensation, subject to defences such as reasonable belief or withdrawal of consent.
Worked example
A Plc's prospectus values a property at N500m; it is worth N50m. An investor subscribes, then discovers the truth. She may rescind and recover her subscription, and sue directors for compensation. The directors' defence of reasonable belief fails if the valuation was never verified and an expert's consent was not obtained.
Traps
Treating CAC registration as sufficient without SEC approval; assuming a "private placement" can be offered to the general public; forgetting promoter disclosure duties continue to the prospectus stage.