Kamal, the promoter of Desire Ltd., has incurred ₹1 lakh for formation of the company. The company refuses to pay all the expenses so incurred by Kamal since the company does not have any provision in the Articles of Ass

A promoter has no legal right to claim promotional expenses for his services unless there is a valid contract. Without such a contract he is not even entitled to recover his preliminary expenses. [Re. English & Colonial Produce Company (1906) 2 Ch. 435 CA]. The promoters are entitled to receive all the expenses incurred in setting up and registering the company, from Board of Directors. The articles should contain provision for payment of preliminary expenses to the promoters. The company may pay the expenses to the promoters even after its formation, but such payments should not be ultra vires the articles of the company. The Articles have provision regarding payment of fixed sum to the promoters. In the present case Mr. Kamal the promoter of Desire Ltd. has incurred ₹1 Lakh for incorporation of company. Considering the fact that the AOA of the company does not contain any provision with regard to such payment, The Company may refuse to pay ₹1 Lakh to Mr. Kamal.