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Ankita Mahajan Harsimran Singh
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Objects Clause • The objects of the company. The Companies (Amendment) Art. and • (ii) (ii) other objects not included in (i).3. provides that in the case of a company formed after the said amending Act. . the Memo must state separately • (i) the main objects and objects incidental and ancillary to the main objects. 1956.
e.. The object clause should decide carefully because it is difficult to alter this clause later on. shareholders will not mentioned in the object clause. No activity can be taken up by the company which is not mentioned in the object clause Moreover. Moreover. It determines the rights and powers of the company and also defines its sphere of activities. They are free to add anything to it provided it is not contrary to the provisions of the Companies Act and other laws of the land. the investors i..• Object Clause: • This is one of the important clauses of the Memorandum of Association. .e. The choice of the object clause lies with the subscribers to the memorandum. shareholders will know the sphere of activities which the company can undertake. the investors i.
Other objects will include all other objects which are not included in the main objects. the memorandum must state separately (a) main objects. . Main objects will include objects to be pursued by the company on incorporation and objects incidental or ancillary to the attainment of the main objects.• The Companies (Amendment) Act 1965 requires that in cause of companies formed after this amendment. and (b) other objects.
By confining the activities within a specified field. • The object clause can be changed to enable a company to carry on its activities more economically. or by improved means to carry on some business which under existing circumstances may conveniently by combined with the object clause . The creditors also feel protected by this clause.• The object clause offers protection to the shareholders by ensuring that the funds raised for the undertaking are not going to be risked in any other undertaking. it serves the public interest also.
then printed copy of the Memorandum as altered must be field with the Registrar within three months of the order.Object Clause (Section 17): • The object clause is the most important clause in the memorandum. The object clause can be changed by passing a special resolution and by getting the permission of the Company Law Board. . When this change is allowed by the Board. A petition is also made to the Company Law Board for issuing a confirmation. its change may affect the activities of the company. A copy of the resolution should be field with the Registrar within 30 days of passing the resolution. This clause is a limitation on the company beyond which it cannot carry its activities.
• The company will be able to attain its objectives by new and improved means. It will be allowed when it necessary for any of the following reasons: • The change is necessary to allow the company to carry on its business more economically or efficiently. . • The company may enlarge the local area of its operations. • The company is enabled by change to carry on some new business with convenience and advantage.• The change in situation and objects clause is allowed only under certain situations.
• To amalgamate with any other company or body of persons.• To restrict or abandon any of the objects specified in the memorandum. • To sell whole of part of the company’s property. .
The memorandum contains rules regarding the capital structure. the objects of the company. its creditors. and all other important matters relating to the company. . and the public to know what its powers are and what is the range of its activities.Memorandum of Asociation The Memorandum of Association is a document which contains the fundamental rules regarding the construction and activities of a company. The purpose of the memorandum is to enable the members of the company. It is the basic document which lays down how the company is to be constituted and what work it shall undertake. the liability of the members. The memorandum is altered only after certain formalities are observed.
The Companies (Amendment) Art. Objects Clause The objects of the company. . whether limited by shares or by guarantee or unlimited. the memorandum shall state the amount of share capital and the division thereof into shares of a fixed amount.Capital Clause In the case of a company having share capital-unless the company is an unlimited company. and (ii) (ii) other objects not included in (i).Area of Operation Clause Except in the case of trading corporations. 3. the State 4 States Iii whose territories the objects extend. Name Clause The name of the company with the word “limited” at the end of the name of a public company and the words “private Limited” at the end of the name of a private company. 5.Liability Clause: the nature of the liability of the members. and each subscriber to the memorandum shall write opposite to his name the number of shares he takes. i. Situation Clause The name of the State in which the registered office of the is to be situated. 1956. 2.Contents of MOA 1. 4. provides that in the case of a company formed after the said amending Act. the Memo must state separately (i) the main objects and objects incidental and ancillary to the main objects. .e.. 7. The Association and Subscription Clause No subscriber to the memorandum shall take less than one share . 6.
Moreover. shareholders will know the sphere of activities which the company can undertake.Object Clause This is one of the important clauses of the Memorandum of Association.e. shareholders will not mentioned in the object clause... . the investors i. Main objects will include objects to be pursued by the company on incorporation and objects incidental or ancillary to the attainment of the main objects. Other objects will include all other objects which are not included in the main objects.e. The object clause should decide carefully because it is difficult to alter this clause later on. They are free to add anything to it provided it is not contrary to the provisions of the Companies Act and other laws of the land. No activity can be taken up by the company which is not mentioned in the object clause Moreover. the investors i. and (b) other objects. It determines the rights and powers of the company and also defines its sphere of activities. The Companies (Amendment) Act 1965 requires that in cause of companies formed after this amendment. The choice of the object clause lies with the subscribers to the memorandum. the memorandum must state separately (a) main objects.
The object clause can be changed to enable a company to carry on its activities more economically.Object Clause The object clause offers protection to the shareholders by ensuring that the funds raised for the undertaking are not going to be risked in any other undertaking. By confining the activities within a specified field. or by improved means to carry on some business which under existing circumstances may conveniently by combined with the object clause. . it serves the public interest also. The creditors also feel protected by this clause.
these object clauses serve the purpose of providing the information to the shareholder about the prospects of the company.Purpose of Object Clause There are several reasons. the shareholder is putting his money in the company he must know the purpose for which the money has been put to the use. Further since. 3. These reasons are listed as under: 1. . which can be identified for such a provision in the Memorandum of Association. The object clause confers a degree of security to the creditors since the object clause defines the limit to which the company can operate the creditor will remain safe if the objects clauses are provided for and the company sticks to those objects. 2. These objects also serve the public interest by preventing the concentration of the economic power and giving the public a chance of knowing the direction in which the company is heading. Since the shareholder while making the investment in any company must possess the information regarding the business plans of the company.
(ii) A petition must be filed to the Company Law Board for confirmation of the change. The object clause of the memo can be changed for the purpose of enabling the company : (a) to carry on its business more economically or more efficiently . (c) to enlarge or change the local area of its operation . (b) to attain its main purpose by new or improved means . . (v) Notice must be given to Registrar of Companies. a certified copy of the Board's Order. or (g) to amalgamate with any other company or body of persons. so that he can appear before the Board and state his objections and suggestions. (e) to restrict or abandon any of the objects specified in the memorandum . (f ) to sell or dispose of the whole. or any part of the undertaking. on sufficient cause shown.-Sec. If no registration is made within 3 months (or such further time as may be allowed by the Board) the alteration and the entire proceedings connected therewith become void. The following procedure must be adopted for changing the object clause : (i) A special resolution must be passed. (iii) Notice must be given to all persons whose interests will be affected by the change (unless the Board otherwise directs). (d) to carry on some business which under existing circumstances may conveniently or advantageously be combined with the objects specified in the memorandum . may. together with a printed copy of the Memo as altered shall be filed with the Registrar within 3 months of the date of the order. of the company . The alteration takes effect after it is registered. revive the order of alteration on an application made within one month. When the alteration is given effect to. (iv) The consent of the creditors of the Company must be obtained or other claims paid off or secured. (vi) After the Board has confirmed the alterations.Change of Object (Sections 17-19). The certificate of the Registrar of Companies is conclusive evidence of the alteration and its validity. The Board. if any. 18.
The first is or rather was. However that might be. since the object clause was contained in the company’s registered documents. the doctrine of constructive notice would prevent the third party from successfully arguing against the company that the directors had ostensible or usual authority to enter into the transaction. Secondly. The authority might of course. say. the function of the objects clause in defining the company’s capacity vis-a-vis third parties. Neither the company nor the other contracting party (if the ultra vires act was the entering into of a contract) could sue upon the contract. 2.Function of Object clause The Function of the Objects Clause in Common Law : It is possible to identify four legal functions which the object clauses serve in the common law: 1. even unanimously. also be limited by provisions in the company’s Articles of Association or by. a resolution of the shareholders in general meeting. . the object clause defined some of the limits upon the authority of the directors as agents of the company. nor could the ultra vires act be ratified by the shareholders. the objects clause would also operate to define and limit the actual authority of the directors (or the authority of a particular director). because the directors could not be regarded as having actual authority as agents to do something on behalf of the company which the company did not itself have capacity to do. Moreover. From this it was deducted that an act done by the company outside its objects clause (an ultra vires act) was null and void. A Company incorporated under the Companies Acts had legal personality only for the purposes laid down in its object clause.
which exposes them to suit by the company and. Fourthly. . Function of Object clause 3. 4. by section 14 of the English Act. Thirdly. since it is the duty of the directors to cause the company to remain within its constitutional powers. for the company to purport to engage in an ultra vires transaction might be regarded as a prospective breach of contract on its part. by the individual shareholder suing derivatively on behalf of the company. is treated as a contract between the members inter se and between each member and the company. Id. which. possibly. the object clause is part of the memorandum of the company. making it liable to be restrained from carrying the matter further at he suit of the individual shareholder. Consequently. for the directors to enter into an ultra vires transaction on behalf of the company is a breach of the duty owned by the directors to their company.
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