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Company Law: Section 31 of the Companies Act 2006 - Coursework Example

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Company Law: Section 31(1) of the Companies Act 2006 Introduction Section 31(1) of the Companies Act 2006 is a provision concerning the removal of the objects clause of the company. The objects clause concerns with the purpose of the company and the range of the activities that company may perform1…
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Company Law: Section 31 of the Companies Act 2006
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Download file to see previous pages Section 31 is a provision on the objects clause of the company. According to the 2006 Companies Act, the objects of the company are unrestricted, whereas in the 1989, the objects had to be mentioned under the Articles of Association. The 1989 Act was liberal in providing for general commercial companies, whereas the 2006 Act provided even greater liberty by removing the necessity to have the objects clause included in the Memorandum4. Ultra vires as a concept was developed in the case Anisminic vs. Foreign Compensation Commission [1969] 2 AC 147, [1969] 2 WLR 163 and also by Kruse vs. Johnson, though in separate fields of law5. Ultra vires as a legal doctrine means beyond the powers of and is invalid. Any act that is done within the legal authority of is known as ‘intra vires’. As per the Companies Act 1986, any act that was beyond the scope of power of the Directors of the company and beyond the objects clause was termed as ultra vires6. The 1986 Companies Act did not permit the shareholders to ratify any ultra vires action by the directors. However, Section 31 and Section 39 of the Companies Act 2006 have greatly reduced the application of ultra vires. The ultra vires provision is still applicable to the companies concerned with charity and in case of companies that are limited by guarantee7. Body Under the Companies Act 2006, the provisions of Section 31 included:- “...Statement of company's object (1)Unless a company's articles specifically restrict the objects of the company, its objects are unrestricted. (2)Where a company amends its articles so as to add, remove or alter a statement of the company's objects—. (a)it must give notice to the registrar,. (b)on receipt of the notice, the registrar shall register it, and. (c)the amendment is not effective until entry of that notice on the register.. (3)Any such amendment does not affect any rights or obligations of the company or render defective any legal proceedings by or against it.. (4)In the case of a company that is a charity, the provisions of this section have effect subject to—. (a)in England and Wales, section 64 of the Charities Act 1993 (c. 10);. (b)in Northern Ireland, Article 9 of the Charities (Northern Ireland) Order 1987 (S.I. 1987/2048 (N.I. 19)).. (5)In the case of a company that is entered in the Scottish Charity Register, the provisions of this section have effect subject to the provisions of the Charities and Trustee Investment (Scotland) Act 2005 (asp 10)...” (Quoted from the Companies Act 2006) Under Section 2 of the Companies Act 1989, the requirements of the Memorandum of Association have been mentioned in detail. The Memorandum clearly should contain the name of the company, the location of the registered office and the objects of the company. It is important the objects of the company be a part of the Memorandum of Association. In case of general commercial companies (provided by the Companies Act, 1989), the objects can be general in nature, and this is dealt with under Section 3A of the Companies Act 1989. When the company is to perform general commercial business and undertake general contracts, the memorandum must contain the objects and should include ‘any trade or businesses clearly mentioned. Hence, under the Companies ...Download file to see next pages Read More
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