Doctrine Of Ultra Vires In Company Law

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.

Doctrine of ultra vires in company law. 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. The company being an artificial person its objects and powers are specified in the memorandum of association moa of the 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. Acts that are intra vires may equivalently be termed valid and those that are ultra vires termed invalid.

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 is a fundamental rule of company law. Such action may or may not be invalid. 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. Its opposite an act done under proper authority is intra vires within the powers. Neither the company can sue nor it can be sued for such acts ashbury railway carriage and iron company v. These acts are not binding on the company.

Unlawful act on the other hand is something that is clearly said to be in violation of land law it is a crime and removes punitive provisions with civil liability and or is clearly prohibited by law. Pdf doctrine of ultra vires in company law agrey. 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. Ultra vires doctrine in the companies act 1965.

Section associated with the doctrine of ultra vires of the companies act is section 20 1 20 2 a b c and 20 3. 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. The ultra vires act is something that goes beyond the company s object clauses scope and ambitions and something not described in the company s moa. Beyond the powers is a latin phrase used in law to describe an act which requires legal authority but is done without it.

The memorandum is the most crucial document for a company. The ultra vires acts are null and void ab initio. Doctrine of ultra vires has provides protection to the investors and creditors o the company.