Doctrine Of Ultra Vires In Company Law With Case

Section 20 1 provides no action prosecuted as an act of shall be invalid by reason only the fact that the company does not have the ability or authority to act.

Doctrine of ultra vires in company law with case. These acts are not binding on the company. Effects of ultra vires transactions doctrine of ultra vires. This doctrine prohibits the company to use the money of the investors for the purpose other than that are stated in object clause of the company enumerated in memorandum of association. The doctrine of ultra vires has its genesis in the case of ashbury railway carriage and iron co.

The memorandum is the most crucial document for a company. The ultra vires acts are null and void ab initio. Vs riche wherein the directors of the company entered into a contract with riche to provide finance to the company for the construction of a railway line. In the case of ashbury railway carriage and iron company v s riche 1875 l r 7 h l 653 the doctrine of ultra vires had been established.

Neither the company can sue nor it can be sued for such acts ashbury railway carriage and iron company v. When the company undertakes any activity not specifically provided for in the object clause of the memorandum of association hereinafter referred as moa of the company. 653 as decided by the house of lords. The concept of ultra vires in the company law the ultra vires mean to go beyond the object clause of a memorandum of association of a company.

It established its roots in 1875 when the directors and company of the ashbury railway carriage and iron company limited v hector riche 1874 75 l r. Indian case laws the doctrine of ultra vires is a fundamental rule of company law. Pdf doctrine of ultra vires in company law agrey. 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.

Hence if the company does an act or enters into a contract beyond the powers of the directors and or. Doctrine of ultra vires has provides protection to the investors and creditors o the company. The doctrine of ultra vires and the legal issue giving rise to the doctrine can arise in three areas of law. The doctrine of ultra vires could not established its roots.

The company being an artificial person its objects and powers are specified in the memorandum of association moa of the company.