''Cotman v Brougham''

918 __NOTOC__ Year 918 ( CMXVIII) was a common year starting on Thursday (link will display the full calendar) of the Julian calendar. Events By place Europe * December 23 – King Conrad I, injured at one of his battles with Arnu ...

AC 514 is

UK company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...

case concerning the objects clause of a company, and the problems involving the ''

ultra vires ('beyond the powers') is a Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ('within the powers'). Acts that are may equivalently be termed ...

'' doctrine. It held that a clause stipulating the courts should not read long lists of objects as subordinate to one another was valid. This case is now largely an historical artifact, given that new companies no longer have to register objects under the Companies Act 2006 section 31, and that even if they do the ''

'' doctrine has been abolished against third parties under section 39. It is only relevant in an action against a director for breach of duty under section 171 for failure to observe the limits of their constitutional power.

Facts

Essequibo Rubber and Tobacco Estates Limited was registered on 6 April 1910 under the

Companies (Consolidation) Act 1908 The Companies (Consolidation) Act 1908 was a United Kingdom Act of Parliament, which regulated UK company law. Its descendant is the Companies Act 2006. Cases decided under this Act *''Re Parkes Garage (Swadlincote) Ltd'' 929 Year 929 ( CMXX ...

, whose section 3 required a company to register its objects. The company had a huge number of objects and its last clause said that clauses should be read individually and not as subclauses of main clauses. The question was whether the company had the capacity to underwrite (guarantee the value of) an issue of shares in the Anglo-Cuban Oil Bitumen and Asphalt Company Limited.

Judgment

Court of Appeal

Warrington LJ was sceptical that these objects clauses were intelligible to the public and wondered whether the registrar could refuse.

House of Lords

Lord Finlay LC relied on subclauses 8 and 12 to say that the company could deal in shares and it was clearly ''

intra vires ('beyond the powers') is a List of Latin phrases, Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ('within the powers'). Acts that are may ...

''. He noted section 17 (now

Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely ...

section 15(4)) saying the incorporation certificate is conclusive evidence that everything is complied with. Lord Parker noted the argument that a company should be wound up on the ground that its substratum had failed, but dismissed it. He said the two purposes of the objects were to show subscribers what their money was to be used for and show those who dealt with a company the extent of its powers. The narrower the objects, he opined, the less the subscriber’s risk but the wider the objects, the greater the security of those who contract with the company. Lord Wrenbury and Lord Atkinson concurred.

Notes

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References