Clause 32
Company Law Reform Bill [Lords]
5:00 pm
Margaret Hodge (Minister of State (Industry and the Regions), Department of Trade and Industry; Barking, Labour)
The hon. Gentleman makes my points for me. We seem to be revisiting this morning’s debate on entrenchment. In the clause we are not trying in any way to undermine the general thrust towards companies’ making more general provisions around their objects but to recognise that some companies want flexibility and that that will be reflected in their objects.
A company can choose to restrict its objects. Its directors will then be obliged to observe those restrictions. In clause 157 in particular, we impose a duty on the directors to act in accordance with the company’s constitution. No doubt we can come back to that point when we discuss the clause. As now, any restriction that applies to a company’s objects will have no effect on third parties dealing with companies because of the effect of clauses 39 and 40.
The proposed amendment would remove the flexibility allowing companies that choose to restrict their objects to do so. Although it would limit the choice, it is available to members of companies who might have good reason to wish to restrict their objects. Joint ventures, charities and specialist company vehicles, such as community interest companies, might all want to restrict their objects. The Bill gives them the freedom so to do, and the amendment would remove that freedom. We see no reason to remove the flexibility of companies to restrict their objects and consequently the powers of their directors to comply with those objects. I hope that the hon. Gentleman will not press the amendment to a vote.