Doctrine of Ultra Vires Under Company Law

Doctrine of Ultra Vires is the basic rule of Company Law. It states that the powers exercisable by the company are to be confined to the objects specified in the MOA.

• So it is better to define and include the provisions regarding the acquiring of business, sharing of profits, promoting company and other financial, gifts , political party funds etc.
• If the company acts beyond the powers or the objects of the company that is specified in the MOA, the acts are considered to be of ultra vires. Even if it is ratified by the all the members, the action is considered to be ineffective.
• Even the charitable contributions have to be based on the object clause.

The consequences of the ultra vires transactions are:

a) Injunction

b) Directors’ personal liability.

c) If a property has been purchased and it is an ultra vires act, the company can have a right over that property.

d) The doctrine to be used exclusively for the companies’ interest.

e) But the others cannot use this doctrine as a tool to attack the company