Clause 32
Company Law Reform Bill [Lords]
5:00 pm
Jonathan Djanogly (Shadow Solicitor General (Also Shadow Minister for Trade and Industry), Law Officers (Assist the Home Affairs Team); Huntingdon, Conservative)
I beg to move amendment No. 16, in clause 32, page 12, line 40, leave out subsection (1) and insert—
‘(1) The objects of every company shall be unrestricted'.
The clause deals with the statement of a company’s objects. The amendment probes the new provisions, but essentially reflects the fact that the ultra vires principle is of declining importance to what a company can do, or how or for what purpose it is run. Almost the only time that it arises is when banking lawyers check that a company is not restricted from borrowing. Frankly, in today’s corporate world, I can see little reason why such checks should be necessary.
I appreciate, of course, that that thinking is partly behind the merger of the memorandum and articles of association, as proposed in the Bill. However, the slow death of the objects, which the clause will induce, could cause transitional confusion, particularly when objects are hidden in articles. Is it not time therefore to bite the bullet and have the general objects provisions, which most new companies adopt, become the standard?
Finally, once the memorandum and articles of association are merged, can we be sure that we will continue to know what constitutes an object? Will the Government be issuing guidance on how those should be described in the articles of association, in order to avoid confusion?