Any act done outside the express or implied objects is ultra vires. Apr 06, 2020 doctrine of ultra vires documents, company law b com notes edurev is made by best teachers of b com. Useful notes on the meaning of doctrine of ultravires. There are certain acts under the company law, which though not expressly stated in the memorandum, are deemed impliedly within the authority of the company and. Doctrine of ultra vires under companies act 1956 the doctrine of ultra vires is a latin term which means beyond powers. If a part of the act or contract is within the authority provided by the memorandum and remaining part is beyond the authority, and both the parts can be separated. In ashbury railway carriage and iron company ltd v. Ashbury carriage company v riche 1875 the acc was an incorporated company under the companies act of 1862. The doctrine of ultra vires under malaysian company law. All those companies that have not been registered, such as partnerships and sole proprietorships will not come under the scope of the doctrine of ultra vires. Ashbury rly carriage and iron co ltd v riche wikipedia. The abolition of the doctrine of ultra vires under the companies code. In the context of ultra vires doctrine there was a case, which can be regarded as the proof or evidence of its application. Applicability of doctrine of ultra vires on companies by.
Similarly, an illegal act will be void even if it falls within. Introduction the object clause of the memorandum of the company contains the object for which the company is formed. If ultra vires the articles, the articles may be altered to make it intra vires. Its importance as case law has been diminished as a result of the companies act 2006 s 31, which allows for unlimited objects for which a company may be carried on. The memorandum of association contains the permitted range of activities in its objects clause and a company cannot practice any other activity which is not defined under the scop. Hence, if the company does an act, or enters into a contract beyond the powers of the directors andor the company itself, then.
Section 4 1 c of the companies act, 20, states that all the objects for. Doctrine of ultra vires the concept of doctrine of ultra. While applying doctrine of ultra vires, the effects incidental or consequential to the act shall not invalid unless they expressly prohibited by the company s act. Any act which requires legal authority, and if done with such an authority, it is characterized in law as intra vires literally meaning within the powers, and if done without such authority, it is ultra vires. This term is usually used to mean and refer to the acts of the corporations or the companies that are taken outside the power or authority granted to them by law or under the charter of the corporation. Introduction ultra means beyond vires means powers an act of the company which beyond the objects clause. Companies act 1989, the ultra vires rule was a regulatory device which sought to. An act of the company must not be beyond the objects clause. Doctrine of ultra vires documents, company law b com. Ultra vires acts fall outside the powers that are specifically listed in a corporate charter or state law.
Acts that are intra vires may equivalently be termed valid and those that are ultra vires. The doctrine of ultra vires is a fundamental rule of company law. The memorandum of association contains the permitted range of activities in its objects clause and a company cannot practice any other activity which is not defined under the scope of objectives mentioned in the memorandum. Company law notes kenya pursuant to the 2015 act november 14, 2017. It states that the objects of a company, as specified in its memorandum of association, can be departed from only to the extent permitted by the act. Its opposite, an act done under proper authority, is intra vires within the powers. As a result, an act which is ultra vires is void, and does not bind the company. In the case of a company whatever is not stated in the memorandum as the objects or powers is prohibited by the doctrine of ultra vires. What is meant by the doctrine of ultra vires in company law. Doctrine of ultra vires explained by advocate sanyog vyas duration. Slade lj destroyed any suggestion that the doctrine of ultra vires was interwoven.
This invariably means, powers have to be delegated to subordinate bodies for the smooth functioning and administration of these bodies and ventures, as the parliament cannot run all these bodies on its own. An act of the company must not be beyond the objects clause, otherwise it will be ultra vires and, therefore, void and cannot be ratified even if all the members wish to ratify it. According to s18 contract act 1965, every company formed should have a memorandum printed and divided into paragraph and with the date stated. Memorandum of association of a company defines the powers of a company. The latin phrase ultra vires is a combination of latin words which refers to beyond the powers. There are certain acts under the company law, which though not expressly stated in the memorandum, are deemed impliedly within the authority of the company and therefore they are.
The doctrine of ultra vires is produced by the constitutional principles of the rule of law, the sovereignty of parliament and the independence of the judiciary. It is a binding document which describes the scope of the company among other things. Rise and fall of the ultra vires doctrine in united. After years of the ultra vires doctrine frustrating commercial dealings and prejudicing outsiders, parliament saw fit to effectively abolish it by enacting s 36 of the companies act 61 of 1973 the 1973 act. Doctrine of ultra vires has been developed to protect the investors and creditors of the company. While applying doctrine of ultra vires, the effects which are incidental or consequential to the act shall not be invalid unless they are expressly prohibited by the company s act. Business company that ultra vires acts are invalid. However, in so far as the 1856 act failed to stipulate any. An act is called ultravires the memorandum of the company if, it is done beyond the powers provided by the memorandum to the company. However, there remains the risk that certain transactions might still be held to be invalid as a result of the doctrine. Position of doctrine of ultra vires in sri lankan company law.
Any act which is consequential to the object clause but not mentioned in the moa unless prohibited by the companies act. The earliest legal view was that such acts were void. There is an agency relationship between the investors who are the real owners and the directors of the company and thereby it is imperative that the there should be limitations with regards to the decision making powers of the directors so as not to indulge in activities that the company is not formed for. The doctrine of ultra vires played an important role in the development of corporate powers. This doctrine can be considered as the central principle in the whole of administrative law. Ashbury railway carriage and iron co ltd v riche 1875 lr 7 hl 653 is a uk company law case, which concerned the objects clause of a company s memorandum of association. The creditors unless they are secured cannot sue on ultra vires transactions perse. Despite the fact that to a great extent it is now obsolete in present day private company law, the precept stays in full drive for government companies. It has been observed that company has an independent legal existence and is a separate body corporate distinct from its.
The word ultra means beyond and the word vires means powers. The court may make an order under section 233 if the conduct of a companys act or omission or a resolution is either contrary to the interests of the members. Nigerian journal of legal studies, imos state university, owerri, nigeria, volix,20102011, pp102104. The paper also focuses on the comparison between english law and indian law regarding the doctrine of ultra vires. An act which requires legal authority but is done without it, is characterised in law as ultra vires. In s18 b contract act 1965, it shows that the requirement of the memorandum of association ma required a statement of object clause. It is expected that the company will act according to the object clause and will not act outside the object clause, if the company does any act which is not a part of the object clause then that act of the company would be declared ultra vires. Doctrine of ultra vires in public law in a welfare state a government undertakes many ventures for the benefit of the people. The doctrine, under current business practices has been prejudicial to creditors.
Some activities not specifically mentioned in the moa, but deemed impliedly as within authority of the company. Doctrine of ultra vires under administrative law by aamir younas raja advocate high court 2 of 2 duration. The crux of the ultra vires doctrine under common law was that any contract entered into by a company which was not in line with the objects in its memorandum of incorporation hereafter memorandum was beyond the company s capacity and therefore void ab initio. Thus, a company which owes its incorporation to a statutory authority, cannot effectively do anything beyond the powers expressly or impliedly conferred upon it by the statute or the moa. The lending of funds ultra vires, the company has no rights a under the company s act b contract act c under equity d none of the above 14. The doctrine of ultra vires is applicable to all those companies that have been incorporated and have a separate existence in the eyes of law. Weve taken precautionary measures to enable all staff to work away from the office.
In this manner, investors of the company can get assured that their money will. Doctrine of ultra vires with respect to an indian company. A memorandum of association of a company is a basic charter of the company. An act, legal in itself, but not authorized by the object clause of the memorandum of association of a company or statute, is ultra vires the company. N, revisiting the doctrine of ultra vires under cama,2004. Neither the company nor the contracting party can sue on it. This doctrine prevents a company to employ the money of the investors for a purpose other than those stated in the objects clause of its memorandum.
If the act done or contract made by the company is beyond the powers given in the objects clause of the memorandum, it is called an act, which is ultra vires the memorandum. The object clause of the memorandum of the company contains the object for which the company is formed. The ultra vires doctrine typically applies to a corporate body, such as a limited company, a government department or a local council so that any act done by the. Any act that lies beyond the authority of a corporation to perform. Though largely obsolete in modern private corporation law, the doctrine remains in full force for government entities. Ultra vires is a latin phrase meaning beyond the powers. The doctrine of ultra vires refers to those acts or decisions that a company may undertake which are beyond the scope of powers granted by the company s objects clause in its memorandum of association. This document is highly rated by b com students and has been viewed 1112 times. Thus, in the case of suttons hospital of the year, despite the fact that the company had a separate existence in the eyes of law, the doctrine of ultra vires did not apply. The current relevant provisions are ss 17 and 18 of the companies act 1993.
In the case of ashbury railway and iron co v rich it was described that, a company incorporated under the companies act has power to do only those things which are authorized by the memorandum of association. An act ultra virus the directors can be rectified if it is not ultra vires a the articles b the memorandum c company act d none of the above. Doctrine of ultra vires in common law and its relevance. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it. The doctrine of ultra vires applies to the memorandum of a company. The doctrine of ultra vires applies to the memorandum of association of a company. Any act done contrary to or in excess of the scope of the activity of the company as laid down by its memorandum of association is ultra vires the company. The literal meaning of this doctrine is acts done beyond power. If a company departs from its moa such an act is ultra vires. A company is incorporated under the companies act, 20 and in accordance to the terms set out in its moa. Discuss the doctrine of ultra vires and its effect in malaysian company law. An act of a company, which is beyond its objects clause, is ultra vires and, therefore, void, even if it is illegal. Why kenya should reconsider its ultra vires doctrine in corporate law.
Ultra vires doctrine under company law all you need to know. The ultra vires doctrine is to protect members and creditors. The members of a company even a single member can get an order of injunction from the court restraining the company from going ahead with the ultra vires act. These changes have already rolled out with no interruptions, and will allow us to continue offering the same great service at your busiest time in the year. Memorandum of association and doctrine of ultra vires. Pdf why kenya should reconsider its ultra vires doctrine. The doctrine of ultra vires assumed a vital part in the improvement of corporate development. An ultra vires act is one beyond the purposes or powers of a corporation.
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