The Companies Ordinance (Amendment) (No. 17) Law, 1980, (hereinafter referred to as Amendment no. 17) has fundamentally reformed the legal status of the objects clause of a company memorandum. It is no exaggeration to say that this amendment constitutes the greatest reform effected in company law in Israel up to the present day.
English Common Law regarded the objects clause as defining the capacity of the company, and not only the powers of those acting on its behalf. This approach, formulated at a time when it was impossible to alter the objects clause of the memorandum persisted even after the English legislature relented somewhat and permitted the objects to be altered, albeit with certain restrictions and according to a special procedure. This is still the approach in England today: the objects of the company are viewed as determining its capacity, and therefore, an act done in deviation from the objects is considered void, and cannot be ratified by the company, even if all the members wish to do so. At the same time, the European Communities Act 1972, affords protection to people transacting with the company in good faith, even in the case of a deviation from the objects (sec. 9(1)).