Ultra vires doctrine pdf

The contract here was to construct a railway. That was contrary to the memorandum of association; what was done by the directors in entering into that contract was therefore in direct contravention of the provisions of the Company Act, It was held that this contract, being of a nature not included in the Memorandum of Association, was ultra vires not only of the directors but of the whole company, so that even the subsequent assent of the whole body of shareholders would have no power to ratify it.

The shareholders might have passed a resolution sanctioning the release, or altering the terms in the articles of association upon which releases might be granted. If they had sanctioned what had been done without the formality of a resolution, that would have been perfectly sufficient. Thus, the contract entered into by the company was not a voidable contract merely, but being in violation of the prohibition contained in the Companies Act , was absolutely void.

It is exactly in the same condition as if no contract at all had been made, and therefore a ratification of it is not possible. If there had been an actual ratification, it could not have given life to a contract which had no existence in itself; but at the utmost it would have amounted to a sanction by the shareholders to the act of the directors, which, if given before the contract was entered into, would not have made it valid, as it does not relate to an object within the scope of the memorandum of association.

Later on, in the case of Attorney General v. Great Eastern Railway Co. The doctrine of ultra vires was recognised in Indian the case of Jahangir R. Mod i v. ShamjiLadha and has been well established and explained by the Supreme Court in the case of A. LakshmanaswamiMudaliar v. Life Insurance Corporation Of India. Even in India it has been held that the company has power to carry out the objects as set out in theobjects clause of its memorandum, and also everything, which is reasonably necessary to carry out those objects.

For example, a company which has been authorized by its memorandum to purchaseland had implied authority to let it and if necessary, to sell it. However it has been made clear bythe Supreme Court that the company has, no doubt, the power to carry out the objects stated in theobjects clause of its memorandum and also what is conclusive to or incidental to those objects, but it has no power to travel beyond the objects or to do any act which has not a reasonable proximate connection with the object or object which would only bring an indirect or remote benefit to the company.

To ascertain whether a particular act is ultra vires or not, the main purpose must first be ascertained, then special powers for effecting that purpose must be looked for, if the act is neither within the main purpose nor the special powers expressly given by the statute, the inquiry should be made whether the act is incidental to or consequential upon.

An act is not ultra vires if it is found:. The doctrine of ultra vires played an important role in the development of corporate powers. Though largely obsolete in modern private corporation law, the doctrine remains in full force for government entities. An ultra vires act is one beyond the purposes or powers of a corporation.

The earliest legal view was that such acts were void. Under this approach a corporation was formed only for limited purposes and could do only what it was authorized to do in its corporate charter. This early view proved unworkable and unfair. It permitted a corporation to accept the benefits of a contract and then refuse to perform its obligations on the ground that the contract was ultra vires.

The doctrine also impaired the security of title to property in fully executed transactions in which a corporation participated. Therefore, the courts adopted the view that such acts were voidable rather than void and that the facts should dictate whether a corporate act should have effect. Over time a body of principles developed that prevented the application of the ultra vires doctrine. These principles included the ability of shareholders to ratify an ultra vires transaction; the application of the doctrine of estoppel, which prevented the defense of ultra vires when the transaction was fully performed by one party; and the prohibition against asserting ultra vires when both parties had fully performed the contract.

Despite these principles the ultra vires doctrine was applied inconsistently and erratically. Accordingly, modern corporation law has sought to remove the possibility that ultra vires acts may occur. Most importantly, multiple purposes clauses and general clauses that permit corporations to engage in any lawful business are now included in the articles of incorporation.

Since the publication of the fourth edition there have been significant changes in corporations law. From a legislative perspective, important changes have also been effected through the passage of, inter alia, CLERP 9.

This has impacted significantly on the law pertaining to executive officers and directors in particular their remuneration and financial reporting and disclosure documents. Judicially, this period has been marked by a considerable number of important cases pertaining to directors' liability arising out of, inter alia, high profile corporate collapses, including HIH and One.

These cases have provided guidance as to the applicability of both statutory and equitable directors' duties, but also clarified the procedural and substantive law aspects of the penalties flowing from breaches of such duties.

Like the 1st edition, this text is written particularly for undergraduate law students. The book introduces students to Australian corporate law in a way that is informed by theory and policy. Throughout the book the authors draw upon materials from fields such as economics, sociology and politics to provide a contextually relevant account of modern corporate law.

Ample references and pointers are provided to policy debates, contemporary issues, and to further reading. The authors bring considerable experience in interdisciplinary corporate law teaching and research.

The authors aim to stimulate the reader into further critical analysis of corporate law issues, and to equip them with the capacity to respond in an informed way to future changes and developments. The book also encourages the reader to independently pursue further research in areas of corporate law.

Whether the act is an individual act or a group act, censuring is a necessity. The reason why censuring has become. Doctrine of Ultra Vires The Memorandum, being the constitution of the company sets out the principal objectives, powers, scope and its area of operation, both internal and external. A company, therefore, can do anything within the scope of the powers specified in the Memorandum.

If officers have performed a tort which is intra-vires, the company will be held liable. Exceptions of Doctrine of Ultra Vires Following are the exceptions to the doctrine of ultra vires —. Ultra Vires Doctrine in the Companies Act Section associated with the doctrine of ultra vires of the Companies Act is Section 20 1 , 20 2 a , b , c and 20 3.

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