Purpose of Object Clause in Company's Memorandum

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INTRODUCTION In the 21st century today, companies can be seen almost anywhere. Companies own every business, supermarkets, water, and every organization you can think of. There are companies which bring interest to lawyers, these are the organization which were created in legal entity by the process of law and only exist by the virtue of law. Companies must be registered and have its own legal personality, and incorporation. A company must also have a memorandum of association and constitution which contains the objects clauses which the company must follow and carry out its own activities legally. What is a memorandum of association? The memorandum of association of a company, often simply called ‘the memorandum’ is a document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the UK, Ireland, India, Bangladesh, Pakistan and Sri Lanka, and also used in many of the common law jurisdictions of the common wealth. What is and object clause? An object clause is a provision in a company’s constitution stating the purpose and range of activities for which the company is carried on. In the UK company law up until reforms in the company’s Act 1989 and the company’s Act 2006, an objects clause circumscribed of capacity, or power, of a company act. The legal position was that any contract entered into beyond the power, or Ultra vires, would be deemed void ‘ab initio’. The legal problems concerning object clauses are now historical artifacts. Now companies no longer have to register objects under the Company’s Act 2006 Section 31, and that even if they do the Ultra Vires doctrine has been abolished against third parties under section 39. It is only relevant in an action against a director for breach of duty under section 171 for failure to observe the limits of their constitutional power.

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