Object Clauses

What is object clause?

An object clause is a provision in a company’s constitution, that is Memorandum of Association, stating the purpose and range of business activities for which the company can be carried on.

The object clauses are set and authorised by the shareholders of the Company and the Board of Directors is required to conduct the company’s businesses within the ambit of object clauses.

The purpose of the object clause is to define and limit the activities which the company is permitted to undertake. Anything which exceeds those limits is ultra vires (beyond the legal power or authority) of the company and may be void.

Change Object Clauses

The company can amend its object clauses by adding, removing or altering a statement of the company’s object clauses.

Any such amendment does not affect any rights or obligations of the company or render defective any legal proceedings by or against it.

The company may amend its objects clause in a general meeting but it cannot ratify a transaction which was ultra vires.

Any shareholders may apply for an injunction from Court to restrain the company from proceeding in the transaction.

Can directors conduct business which is not stated in the Object Clauses?

The directors would be in breach of their duty to the company and may be required to make good to the company any loss it has suffered in this connection. (Directors are to compensate the company any losses incurred on this transaction).

But the directors are not liable to compensate any other party who has suffered loss in his dealing with the company because he is deemed to be aware of the restrictions on its powers contained in or implied by the objects clause.

However, the directors could be liable if they had personally warranted to the other party.

Sample of object clauses

The following are the samples of the object clauses for 2 companies:

Event Management Company:

To carry on business as professional event management services providers, producers, organisers, advisers and consultants and to provide, plan, prepare, manage, advise, organise, engage, supply, perform all kind of events and functions management services across wide range of projects, from simple meetings to fully serviced and packaged conferences, exhibitions and award ceremonies nationwide and worldwide and the provision of the relevant management, advisory and consultancy services as well as generally any other business which can be conveniently carried on in connection therewith.

Construction Company:

To carry on business as constructors, builders, contractors, sub-contractors, traders, distributors, consultants, designers and advisers of all kinds of construction works including but not limited to construction of all kinds of buildings, landscaping, repairs and maintenance of buildings, mechanical and electrical works, interior design, painting and trading and marketing of all kinds of construction materials including sand, stones, machineries and related accessories within or without Malaysia and all other businesses in connection therewith and to deal in all products of residual and by products incidental to or obtained in any of the business carried on by the company.

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Will the object clause have any effects over the company’s operations or tax status?