Rakesh and Vishesh are in the process of forming a new company under the name of 'Money Grow Private Limited'. The Company would be an NBFC. While drafting the object clause in Memorandum, a clause related to power to se

The powers exercisable by a company are to be confined to the objects specified in the memorandum. While the objects are to be specified, the powers exercisable in respect of them may be express or implied and need not be specified. Every company may necessarily possess certain powers which are implied, such as, a power to appoint and act through agents, and where it is a trading company, a power to borrow and give security for the purposes of its business, and also a power to sell. Such powers are incidental and can be inferred from the powers expressed in the memorandum. The principle underlying the exercise of such powers is that a company, in carrying on the business for which it is constituted, must be able to pursue those things which may be regarded as incidental to or consequential upon that business. Powers which are not Implied The following powers have been held 'not to be implied' and it is, therefore, prudent to include them expressly in the objects clauses: Acquiring any business similar to the company's own business; Entering into an agreement with other persons or companies for carrying on business in partnership or for sharing profit, joint venture or other arrangements. Very clear powers are necessary to justify such transactions; Taking shares in other companies having similar objects; Taking shares of other companies where this investment authorizes the doing indirectly that which will not be intra vires if done directly; Promoting other companies or helping them financially; A power to sell and dispose of the whole of a company's undertaking; A power to use funds for political purposes; A power to give gifts and make donations or contribution for charities not relating to the objects stated in the memorandum; Acting as a surety or as a guarantor. Therefore, in light of the above stated points, the contention of the management is not right as the clause related to power to sell and dispose of the whole of a company's undertaking is not an implied power of Board and should be written expressly in the objects clause of the Memorandum of Association.