DOCTRINE OF ULTRA VIRES
The term Ultra Vires is derived from the Latin word meaning “ beyond the powers of”. The object clause of the memorandum of the company contains the object for which the company is formed.
DOCTRINE OF ULTRA VIRES
The term Ultra Vires is derived from the Latin word meaning “ beyond the powers of”. The object clause of the memorandum of the company contains the object for which the company is formed. 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 members wish to ratify. This is called the doctrine of ultra vires. The expression “ultra vires” consists of two words: ‘ultra’ and ‘vires’. ‘Ultra’ means beyond and ‘Vires’ means powers. Thus, the expression ultra vires means an act beyond the powers. 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. An ultra vires act is void and cannot be ratified even if all the directors wish to ratify it. Sometimes the expression ultra vires is used to describe the situation when the directors of a company have exceeded the powers delegated to them.
Where a company exceeds its power as conferred on it by the objects clause of its memorandum, it’s not bound by it because it lacks legal capacity to incur responsibility for the action, but when the directors of a company have exceeded the powers delegated to them. This use must be avoided for it is apt to cause confusion between two entirely distinct legal principles. Consequently, here we are restricting the meaning of ultra vires to the objects clause of the company’s memorandum.
SCOPE OF DOCTRINE OF ULTRA VIRES
The doctrine of ultra vires applies only to those companies that have been incorporated or have a separate existence in the eyes of law. All those companies that have not been registered such as sole proprietorship or partnership will not fall under the scope of the doctrine of ultra vires. Only the companies that are incorporated or have a separate existence in the eyes of law come under the scope of the doctrine of ultra vires.
Every illegal transaction or abuse of power by directors or employees of a company will not come under the scope of the doctrine of ultra vires. Only the transactions that are beyond the scope of what a company can do will be liable under the scope of the doctrine of ultra vines. What a company can do or the purpose of the company is always mentioned in the object clause of the Memorandum of Association of the company. Therefore, if the company is exceeding the authority it has mentioned itself in the object clause of the Memorandum of Association will be criticized under this doctrine.
WHAT ARE THE CONSEQUENCES OF DOCTRINE OF ULTRA VIRES
The Doctrine of Ultra Vires's consequence states that any act done or contract made by the company which goes beyond the powers of the directors and company is completely void and inoperative and hence not binding on the company. By Considering this all, a company can be restrained from using these funds for purposes other than those sanctioned by the memorandum. Also, it can be restrained from carrying out any trade different from the one it is authorized to carry out.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
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