Main object of the company
The Memorandum of association has different clauses and the object clause is one of them. Every company is formed for specific business activity. So before moving ahead with private limited company
The need for Object Clause
Including business activity enables others to understand the scope of the company. While contracting with the company one should know whether the company can indulge in activities mentioned in the contract. It can be checked from the object clause of MOA of the company. The MOA and AOA are the essential documents of the company. A company cannot undertake activities not mentioned in the MOA. Hence if a company works beyond the mentioned activity then it will be void ab initio.
Contents of Object Clause
The object clause in MOA is divided into 2 parts: the “Main object” and the “Matters which are necessary for the furtherance of the main objects”. To clarify:
All promoters of a company have some ideas. The main object is to list such ideas in legal language. It will cover details concerning the business activities which the company is going to or will carry out.
Matters which are necessary for the furtherance of the main objects:
In this, points which are necessary to achieve the main objects of the company must be covered. It may include to purchase, sell a land/building, to apply/contract for intellectual property rights, technical assistance, to merge/amalgamate with any other person etc. The format has been provided by the government; one can add or remove the clause as applicable.
What to include
The main object must include matters as mentioned below
- A brief including all the activities carried on by a company. It can include manufacturing or service or trade covering all the areas.
- To cover business activities in more generic terms.
- To include supporting activities to the main business activity.
- One should also include related activities which can help to diversify the business in the future.
Hence the object clause must be drafted covering major areas of the business. It must be drafted in a way that avoids revisions in the future.
Change in activity
Whenever there is a need to change or amend the business activity, it can be done. A company will require approval from the Ministry of Corporate Affairs to change the business activity. Only after the Ministry’s approval, a company can do a new business activity.
The object clause must be drafted in detail so it covers all the activity and changes are not required. Being an essential part of MOA, it is recommended that some professional expertise is tapped to draft the clause.