OBJECTS CLAUSE AND SECTION 3A OF THE COMPANIES ACT 1985?
| Unlike some countries (e.g. Australia), English law requires companies to have a memorandum of association containing an objects clause - section 2(1)(c) of the Companies Act 1985. The objects clause delimits the purposes for which the company is formed and also its legal capacity. Over time, this requirement has led to the practice of drafting wordy objects clauses designed to be very broad in scope so as to avoid the problems associated with a company's acting beyond its legal capacity (i.e. acting ultra vires). However, section 3A of the Companies Act 1985 (which was introduced by an amendment in 1989) brought about a reform in this area and is in the following terms:
| | '3A Statement of company's objects: general commercial company | | Where the company's memorandum states that the object of the company is to carry on business as a general commercial company- |
(a) | the object of the company is to carry on any trade or business whatsoever, and |
(b) | the company has power to do all such things as are incidental or conducive to the carrying on of any trade or business by it.'
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| As can be seen, section 3A allows for a short form objects clause which Parliament no doubt intended would do away with the multitude of objects and powers which legal draftspeople included in the past in order to avoid the operation of the ultra vires doctrine. The clause is suitable for a company carrying on business as a 'general commercial company'. In UKcorporator's opinion, this extends to companies trading in any type of goods or services as well as companies holding any type of investment (e.g. land, shares etc) or serving any other commercial function. Where the clause is used, the company automatically has very broad legal capacity, namely, sufficient capacity to do 'all such things as are incidental or conducive to the carrying on of any trade or business by it'. |
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