Doctrine Of Ultra Vires In Company Law

The doctrine of ultra vires is a fundamental rule of company law. The doctrine of ultra vires and the legal issue giving rise to the doctrine can arise in three areas of law. Neither the company can sue nor it can be sued for such acts ashbury railway carriage and iron company v.

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Doctrine Of Ultravires

Ultra Vires Doctrine

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.

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. These acts are not binding on the company. Effects of ultra vires transactions doctrine of ultra vires. The memorandum is the most crucial document for a company.

The company being an artificial person its objects and powers are specified in the memorandum of association moa of the company. 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 acts are null and void ab initio. The first time the strict doctrine of ultra vires was tempered by the house of lords was in 1880 in an application for a perpetual injunction with regard to a contract entered in this instance by a company incorporated by statute.

Business company that ultra vires acts are invalid. Ultra vires doctrine in the companies act 1965. Such action may or may not be invalid. 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.

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. 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. In ashbury railway carriage and iron company ltd v. Section associated with the doctrine of ultra vires of the companies act is section 20 1 20 2 a b c and 20 3.

Pdf doctrine of ultra vires in company law agrey. 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. The action transaction may be reviewed in two the position under common law and under the companies act 1965. According to company law.

The 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.