§ 140 Clause 97, page 95, line 19, leave out from 'formation),' to 'A' in line 29 and insert `after section 3 (forms of memorandum) insert—
§ ("Statement of company's objects: general commercial company
§ 3A. 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.".
§ (2) In the same Chapter, for section 4 (resolution to alter objects) substitute—
§ Resolution to alter objects.
§ Lord Fraser of Carmyllie
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 140.
The effect of the amendment is to delete the provision in the current Bill that the objects of a company may be stated in any manner. That provision in fact does no more than set out the present position at common law; that is to say that the draftsman of a company's objects clause is not constrained by the content—as opposed to the form—of the model memoranda laid down by the Secretary of State under the Act. The content will depend on what objects the company's founders wish to pursue. However, the provision was being misunderstood in some quarters. Given this misunderstanding and since, as I say, this provision was doing no more than setting out the position at common law, we have thought it best to delete the provision and rely on the common law.
§ Moved, That the House do agree with the Commons in the said amendment.—(Lord Fraser of Carmyllie.)
§ Lord Wedderburn of Charlton
My Lords, I ask the noble and learned Lord one question on the new amendment as it stands. That concerns not the dropping of the words that he spoke to but the ability of the company to adopt the status of a general commercial company. There is some confusion about the Government's intention on one small point which could be important. If the company adopts what one might call the general commercial clause as its objects, can it do so with exceptions? Can it do so with provisos or must it take the offer 100 per cent.? I have no particular view as to which is better, but there is a question-mark against this. It looks as though the company has to take it 100 per cent.
§ Lord Fraser of Carmyllie
My Lords, at the heart of an operation of a limited liability company lies a balance between directors and shareholders—a matter which frequently vexes the noble Lord. In my view, giving a general commercial company power to do anything at all, even if it were subject to whatever express limitations were in the memorandum, would shift the balance too far away from the shareholders and place them too much at risk. The provision as it is would enable shareholders to give their company a wide-ranging power to carry on any trade or business, but if still wider powers are required it will be open to them to set them out in the memorandum. The onus should not be on the shareholders to set out limitations on an absolute power. I hope that answers the noble Lord.
§ On Question, Motion agreed to.