If you have looked at an older company's paperwork, you may have seen a long "objects clause" in its memorandum of association, listing everything the company was set up to do. A natural question follows: is a company limited to those objects, and what happens if it acts outside them? The short answer in modern law is that, for most companies, the old restrictions have largely fallen away. Here is how it works.
The old world: objects and "ultra vires"
Under the law before the Companies Act 2006, a company had to state its objects in its memorandum of association. Anything a company did beyond those objects was said to be ultra vires (beyond its powers) and could be treated as void. To avoid being caught out, companies wrote ever-longer objects clauses trying to cover every conceivable activity.
The modern default: unrestricted objects
The Companies Act 2006 reversed the starting point. Unless a company's articles of association specifically restrict its objects, those objects are unrestricted (section 31). In practice, most companies formed today have no objects clause at all, and can lawfully do anything a natural person could do.
The role of the memorandum also changed fundamentally. For companies formed under the 2006 Act, the memorandum is now just a short historical document confirming that the subscribers wished to form the company. For older companies, any objects that used to sit in the memorandum are now treated as part of the articles (section 28), and can be amended or removed by special resolution.
What if a company does act outside a restriction?
Two protective rules matter here, and they mostly protect outsiders dealing with the company:
- The act is still valid. The validity of something a company does cannot be questioned merely because it lacked capacity due to something in its constitution (section 39). So a deal is not automatically void just because it falls outside a stated object.
- Outsiders are protected. In favour of a person dealing with the company in good faith, the power of the directors to bind the company is treated as free of any limitation in the company's constitution (section 40). A person dealing with a company is not required to check the company's constitution.
So are objects irrelevant?
Not quite. A restriction in the articles still binds the company internally: it remains the directors' duty to act within the company's constitution and only to exercise powers for proper purposes. A director who ignores a genuine restriction can be in breach of duty to the company, even though the transaction with an innocent outsider is still valid. Certain companies (notably charities) also remain subject to special limits on their objects.
What this means in practice
- A typical modern company can do almost anything lawful; it usually has no objects clause.
- If you want to limit your company's activities, you must put a clear restriction in the articles.
- Third parties dealing in good faith are generally safe even if a deal strays beyond a restriction.
- Directors must still respect any restrictions and their general duties, the protection is for outsiders, not for directors who overstep.
Key takeaways
- The Companies Act 2006 made company objects unrestricted by default (section 31).
- The old ultra vires problem no longer invalidates deals with good-faith outsiders (sections 39–40).
- The memorandum is now a short historical document; old objects are treated as part of the articles.
- Restrictions still bind directors internally as a matter of duty, and special rules apply to charities.
Sources
- Companies Act 2006, sections 28, 31, 39 and 40
- The reform of the memorandum and objects under the Companies Act 2006
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified solicitor.