Doctrine of Ultra Vires
- An act, legal in itself, but not authorized by the object clause of the Memorandum of Association of a company or statute, is Ultra Vires the company. Hence, it is null and void.
- An act ultra vires the company cannot be ratified even by the unanimous consent of all shareholders.
- If an act is ultra vires the directors of a company, but intra vires the company itself, then the members of the company can pass a resolution to ratify it.
- If an act is Ultra Vires the Articles of Association of a company, then the same can be ratified by a special resolution at a general meeting.
The Flip-side
While the main advantage of the Doctrine of Ultra Vires is the protection of shareholders and creditors, it has disadvantages too. This doctrine prevents the company from changing its activities in a direction agreed by all members. Further, a special resolution can alter the object clause of the Memorandum. This defeats the core purpose of the doctrine.
