What are a company's objects?
A company's objects are set out in its memorandum of association. They are a statement of what the company is set up to do. Companies incorporated before 1989 usually had very long objects clauses, setting out in detail all the possible types of business the company may want to engage in, followed by supplementary objects or powers covering all the standard activities of a company such as taking interests in land, borrowing money, lending money, employing people, etc. Such prolixity was an attempt to avoid the effects of the ultra vires rule.
At common law a company is limited to acting within the objects set out in
its memorandum of association. Anything purported to be done by a company which
is beyond those objects would be 'ultra vires' and void at common law, and the
directors could be personally liable for such acts.
The common law rule is now subject to CA 1985, sec35: The validity of an act
by a company shall not be called into question on the ground of lack of capacity
by reason of anything in the company's memorandum.
It is still possible for the directors of a company to be liable for ultra vires
acts. This is a complex area, detailed consideration of which is beyond the
scope of this database.
In practice, the problem can be avoided by specifying in the memorandum that
the company is a 'general commercial company' which, by CA 1985, sec3A, can
carry on any trade or business and has power to do all such things as are incidental
or conducive thereto. Nearly all modern trading companies are set up with general
commercial company objects, and many older companies have now had their objects
changed to this provision.
Incorporation Services Limited provides an expert service
for all your company formation and company law requirements, including any issue
concerning a company's objects.
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