Doctrine Of Ultra Vires Meaning In Company Law

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. An act is ultra vires if it is beyond the legal powers of the person doing it. The ultra vires doctrine is a kind of insurance policy that reassures a company s shareholders and creditors that the company will not use their assets or funds for any purposes other than those that are afforded to it and specified within the ultra vires doctrine.

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Doctrine Of Ultravires

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Doctrine Of Ultra Vires In Public 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.

Doctrine of ultra vires meaning in company law. This doctrine got its roots firm in 1875 in case of ashbury railway carriage and iron company ltd. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it. The company being an artificial person its objects and powers are specified in the memorandum of association moa of the company. Thus the expression ultra vires means an act beyond the powers.

An ultra vires act is void and cannot ratified even by majority of shareholders. In the uk the ultra vires doctrine has been radically changed by the companies act 1989 to the extent that persons doing business with companies without notice of the problem have little to fear. 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. The doctrine of ultra vires is a fundamental rule of company law.

There are three types of ultra vires acts which outlined below. The main object of the doctrine of ultra vires is to protect the interest of the company from zealous directors and members who act beyond their authorised powers motivated to earn profits. Here the expression ultra vires is used to indicate an act of the company which is beyond the powers conferred on the company by the objects clause of its memorandum. Thus the expression ultra vires means an act beyond the powers.

This doctrine enables the company to avoid any such act or transaction that the members were not authorised to perform and which shall be detrimental to the interest of the company. This known as doctrine of ultra vires. 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. An act is called ultra vires the memorandum of the company if it is done beyond the powers provided by the memorandum to the company.

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 memorandum is the most crucial document for a company. Types of ultra vires acts. Ultra vires the memorandum by the company acts performed by the company that are beyond the powers granted to it in the memorandum.

Thus an act by a company not expressly or impliedly permitted by its memorandum or articles is ultra vires.