The doctrine of substantive ultra vires law teacher. The ultra vires doctrine is a kind of insurance policy that reassures a companys 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. Ultra vires the directors but intra vires the company can be ratified by shareholders in agm. The doctrine of ultra vires assumed a vital part in the improvement of corporate development. For some the doctrine is the central principle of administrative law, without. For many years, the concept of ultra vires has been used by company.
Invalid excess of authority or power exercised by an entity. If an act or transaction is ultra vires the directors i. 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. The doctrine envisages that an authority can exercise only so much power as is conferred on it by law. Section associated with the doctrine of ultra vires of the companies act is section 20 1, 20 2 a, b, c and 20 3. Powers ultra vires problems remaining after legislative and judicial modification of the doctrine, 34. First th2 ande academic, s weighed in increasingly, eminent judges speaking or writing extrajudicially have described the doctrine as a fairy tale3 or a fig leaf. The doctrine of ultra vires applies to the memorandum of association of a company. Proposed revision of the ultra vires doctrine scholarship. 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. Any member of the company can bring injunction against the company to prevent it from doing any ultra vires. 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 body, which is beyond its capacity to act will be considered void. An ultra vires act is one beyond the purposes or powers of a corporation. There is a growing literature concerning the role of the ultra vires doctrine and its place within administrative law.
A company called the ashbury railway carriage and iron company, was incorporated under the companies act, 1862. The doctrine of ultra vires is a fundamental rule of company law. 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. Important topics for company and compensation laws chapter 4 memorandum of association 4 marks pdf will be provided soon. An act which requires legal authority but is done without it, is characterised in law as ultra vires. The doctrine of ultra vires had its origin in judicial deduction from the fictional conception of corporations as artificial persons, creatures of the law, which have no. The effects of an ultra vires act can be summed up as follows.
Hence, if the company does an act, or enters into a contract beyond the powers of the directors andor the company itself, then. An ultra vires act will be wholly void and it will not bind the company. Ultra vires acts fall outside the powers that are specifically listed in a corporate charter or state law. After the neglect of administrative law in the early part of the twentieth. Critical analysis of the doctrine of ultra vires 1 simran chandok introduction in todays day and age, practically every human act needs to be censured. An ultra vires act is void and cannot be ratified even if all the directors wish. The concept of the doctrine of ultra vires was mainly due to the court rather than to parliament. Section 20 1 provides no action prosecuted as an act ofshall be invalid by reason only the fact that the company does not have the ability or authority to act. Section 4 1c of the companies act, 20, states that all the objects for which incorporation of the company is proposed any other matter which is considered necessary in its furtherance should be stated in the memorandum of the company. The doctrine of ultra vires is the basic doctrine in administrative law. It was developed although not in its form today as far back as 16, where it was held that a company could be restrained from exceeding the object stated in the charter of incorporation. Scribd is the worlds largest social reading and publishing site. 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. Doctrine of ultra vires the concept of doctrine of ultra.
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. Though largely obsolete in modern private corporation law, the doctrine remains in full force for government entities. Doctrine of ultra vires in public law in a welfare state a government undertakes many ventures for the benefit of the people. The doctrine in the law of corporations that holds that if a corporation enters into a contract that is beyond the scope of its corporate powers, the contract is illegal. Once the report is generated youll then have the option to download it as a pdf. Whether the act is an individual act or a group act, censuring is a necessity. Investment acquired through ultra vires transaction. The ultra vires doctrine in a constitutional setting. The doctrine of ultra vires was particularly introduced to protect the interests of creditors and shareholders, the object clause is considered the preamble of the company, and therefore anything was done which is not inconsistent with the preamble will definitely be termed as void.
An act of the company must not be beyond the object clause otherwise it will be ultra vires and therefore, void and cannot be ratified even if all the member wish to. Acts that are intra vires may equivalently be termed valid and those that are ultra vires invalid legal issues relating to ultra vires can. Ultra vires doctrine under company law all you need to know. Still the central principle of administrative law mark elliott i. The latin phrase ultra vires is a combination of latin words which refers to beyond the powers. 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 ultra vires doctrine has doctrine of ultra vires as previously mentioned, the first time england acknowledged the doctrine of ultra vires was in 1612. Useful notes on the meaning of doctrine of ultravires. Since the powers exercised by any officer of an organization are limited by the constituting or vesting instrument such as a memorandum of association, any act outside those limitations is ultra vires and may be challenged in the courts. Check the sections youd like to appear in the report, then use the create report button at the bottom of the page to generate your report. The doctrine of ultra vires played an important role in the development of corporate powers. However, after the introduction of the limited liability partnership act, the real importance of the doctrine of ultra vires came to light.
It has been observed that company has an independent legal existence and is a separate body corporate distinct from its. Any activity done out of the purview of the memorandum. An action of the authority is intra vires when it falls within the limits of the power conferred on it but ultra vires if it goes outside this limit. Doctrine of ultra vires free download as powerpoint presentation. The word ultra means beyond and the word vires means powers. It also helps the creditors to see whether their money is.
Introduction ultra means beyond vires means powers an act of the company which beyond the objects clause. Ultra vires definition, meaning, examples, cases, processes. If an act requires legal authority and it is done with such an authority, it is characterized in law as intra vires literally meaning within the powers and if it is done. Doctrine of ultra vires documents, company law b com. Ultra vires is a latin phrase meaning beyond the powers. Judicial reappraisal of the parameters of the common law doctrine of ultra vires. Doctrine of ultra vires in common law and its relevance. As a result, an act which is ultra vires is void, and does not bind the company. The earliest legal view was that such acts were void. Apr 25, 2020 doctrine of ultra vires documents, company law b com notes edurev is made by best teachers of b com.
Doctrine of ultra vires explained by advocate sanyog vyas duration. 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. Intra vires the company but not done in prescribed manner, this can be validated by shareholders consent. Pdf the ultra vir es rul e represents p erh ap s one of th e most imp ortant an d en during contribution of common law in the regulation of.
Tlhe ultra vires doctrine has been held to apply, first where the company purports to act beyond its purposes as set out in its constitution, secondly, where the. The memorandum of association of ashbury defined its objects as to make and sell, or lend on hire railway carriages and wagons and all kinds of railway plants etc to carry on the business of. Rise and fall of the ultra vires doctrine in united. The paper explains that initial and old concept of the doctrine of ultra vires was a concept of only lack of legal power to do an act. If any act is ultra vires the articles, it can be rectified by a special resolution at a. An act, legal in itself, but not authorized by the object clause of the memorandum of association of a company or statute, is. Its opposite, an act done under proper authority, is intra vires within the powers. The application of the doctrine of ultravires was explained in details by the house of lords in ashbury railway carriage co. Doctrine of ultra vires company law common law private law. Thus, in india, if the doctrine of ultra vires is strictly applied, where the contract entered into by a third party with a company is found ultra vires the company, it will be held void and cannot be ratified by the company and neither the company can enforce the contract against the third party nor the third party can enforce it against the. The doctrine of ultra vires has been aptly described by sir william wade as the central principle of administrative law1 but in recent years it has been subjected to criticism.