Promoter

The fiduciary position of a promoter may be summed up as follows:

•     Not to make any profit at the expense of the company
•     To give benefit of negotiations to the company

                 Erlanger V. New Sombrero Phosphate Co.,

•      To make a full disclosure of interest or profit
•       Not to make unfair use of position

Erlanger V. New Sombrero Phosphate Co.,

A syndicate, of which Erlanger was the head, purchased an island said to contain valuable minerals. Erlanger, as promoter, sold the island to a company newly formed for the purpose of buying it. A contract was entered into between X, a nominee of the syndicate, and the company for purchase at double the price actually paid by Erlanger.

Held, as there had been no disclosure by the promoters of the profit they were making, the company was entitled to rescind the contract and to recover the purchase money from Erlanger and the other members of the syndicate.