Objects clause amendment allowed where new business is compatible with existing business, subject to narrowing vague overbroad wording.

An alteration of a company's objects clause may be sanctioned where the proposed new business is not inconsistent with the existing business and can be conveniently and advantageously combined with it. The proposed manufacture of steel goods was held compatible with the company's sugar, oil and allied activities, but the objects clause was too wide because it included "brass founders, metal workers" and the vague term "etcetera." The court therefore approved the amendment only after deleting those expressions and imposing a reasonable safeguard requiring a separate profit and loss account for the new business for five successive years.

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Issues: Whether the amendment to the objects clause of the memorandum of association should be confirmed, and whether the proposed new business was capable of being conveniently and advantageously combined with the existing business.

Analysis: The proposed manufacture of steel goods was not shown to be destructive of, or inconsistent with, the company's existing business in sugar, oil and allied activities. A new line of business is not rejected merely because it is a new departure; the real question is whether it can be conveniently and advantageously combined with the existing business. The court also found the proposed clause too wide in two respects, namely the inclusion of brass founders and metal workers, and the use of the vague expression "etcetera" after steel castings. As to safeguards, the direction to maintain a separate profit and loss account for the new business for five years was considered appropriate, while a separate balance-sheet was not required.

Conclusion: The amendment was confirmed, but only after deleting the words "brass founders, metal workers" and "etcetera", and subject to the condition that a separate profit and loss account be prepared for the new business for five successive years.

Ratio Decidendi: An alteration of objects may be sanctioned where the new business is not inconsistent with the existing business and can conveniently and advantageously be combined with it, subject to the court imposing reasonable limiting conditions and excising overbroad or vague expressions.

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