Section 31: Statement of company’s objects
98.This section provides for a new approach to the question of a company’s objects. Under the 1985 Act all companies are required to have objects and these objects are required to be specified in the memorandum. The 1985 Act also makes specific provision for where a company states its objects to be to carry on business as a general commercial company (see section 3A of the 1985 Act).
99.Based on a recommendation of the CLR (Final Report, paragraph 9.10), under the Act a different approach is taken. Instead of companies being required to specify their objects, companies will have unrestricted objects unless the objects are specifically restricted by the articles (see subsection (1)). This will mean that unless a company makes a deliberate choice to restrict its objects, the objects will have no bearing on what it can do. Some companies will continue to restrict their objects. Companies that are charities will need to restrict their objects (under charities legislation) and some community interest companies may also choose to do so.
100.Subsection (2) provides that where a company changes its articles to add, remove or alter a statement of the company’s objects, it must give notice to the registrar. The registrar is to register that notice, and the alteration does not take effect until it has been so registered.
101.Subsection (3) ensures that such an amendment to the company’s articles will not affect any rights or obligations of the company or render defective any legal proceedings by or against it.
102.For companies which are charities, the effect of this section is subject to section 64 of the Charities Act 1993 in England and Wales and in Northern Ireland subject to the Charities (Northern Ireland) Order 1987 (SI 1987/2048 (NI 19)) (subsection (4)).
103.Subsection (5) makes equivalent provision for Scotland. These provisions impose additional requirements in the case of companies which are charities when changing certain aspects of their constitutions, including their objects.
104.The directors of a company are under a duty to observe the company’s constitution (see section 171) although restrictions in objects will, as now, have little effect outside of the internal workings of the company because of the effect of sections 39 and 40 (except in the case of charities where modified rules again apply – see section 42).