The description of the object of the legal entity
As included in Article 2:177 of the Dutch Civil Code, the object of the legal entity is included in the articles of association (in case of a private company). The object of the legal entity determines the limits of its activities. Among other things, the formulation of the object of the legal entity may indicate whether or not a legal act falls within the scope of the object; the actual activities of the company must fit into the textual description of the legal entity as set out in the articles of association.
If a legal entity carries out activities which are not mentioned in the articles of association, this may lead to the voidability of the legal act in question. After nullification of the legal act, the transaction may be reversed and the damages suffered by the legal entity may be recovered from its board members or from third parties who know or should have known that this legal act was not among the usual activities of the legal entity.
Only the legal entity itself can rely upon exceeding the object of the legal entity.
When an ICT consultancy company also starts selling facemasks and these turn out to be faulty, causing damage to the company, the company (often also a trustee on behalf of the company) can hold the board, or the third party (for example the buyer) who knew or should have known that this activity does not belong to the company, liable for the damage suffered by the company.
The consequences of exceeding the object of the legal entity can therefore be significant for you as a board member of the legal entity.
In short, dealing creatively with changing main activities due to circumstances is possible and will not easily lead to problems, as long as it remains in contact with the main object of the legal entity.
In any case, we advise entrepreneurs to carefully study the articles of association before expanding their activities and, if necessary, to make the articles of association more appropriate to the activities.