Business Law Ultra Vires

Topics: Corporation, Company, Ultra vires Pages: 26 (9083 words) Published: May 16, 2013
British Institute of International and Comparative Law

Is the Doctrine of Ultra Vires Dead? Author(s): R. Baxt Source: The International and Comparative Law Quarterly, Vol. 20, No. 2 (Apr., 1971), pp. 301315 Published by: Cambridge University Press on behalf of the British Institute of International and Comparative Law Stable URL: . Accessed: 26/04/2013 02:48 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .

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MOST traditions die hard and it seems that, despite a long and often

apparently successful defensive campaign, the supporters of the doctrine of ultra vires would probably now admit that if the doctrine is not dead it is no more than a "walking corpse." 2 In Australia this has been brought about by two developments, and in the U.K. the first development is expected shortly to be introduced by amendment to the Companies Act. The first, a statutory development, is seen in the introduction into the Companies Acts of the various Australian territories and states, of provisions which are aimed at giving to companies almost unlimited powers and which are aimed at virtually abolishing the doctrine except for limited purposes; 3 the second is seen in the interpretation given to an objects clause in a company's memorandum of association which vests in the directors the power to carry out whatever business "they deem would be beneficial to the company." 4 In the evidence given to the Jenkins Committee on Company Law Reform, the supporters and opponents of the doctrine had ample opportunity to elaborate their views. The former pointed to renewed interest in investment. ". . . we feel that there is now a new race of investors appearing, the little man, and we think that everything should be done so that he knows exactly what is happening; if he buys shares in a company he ought to know . .. the activities of the company . . . in which he placed his money."5 The opponent's view is characterised by the following statement made in the report of the Cohen Committee.6 ". . . the doctrine of ultra vires is an illusory protection for the shareholders and may be a pitfall for third parties dealing with the company . . . the ultra vires doctrine serves no positive purpose but is, on the other hand, a cause of unnecessary prolixity and vexation." It is not untrue to suggest that a careful appraisal of the evidence before the Jenkins Committee reveals that the majority of witnesses supported its Generally referred to as ultra vires, although it is occasionally referred to as " extra vires." This is to be contrasted to illegal actions (see infra) and actions which are outside the powers of directors. See e.g., Pennington's Company Law (2nd ed.) (1967) pp. 144 et seq. 2 See Wedderburn "The Death of Ultra Vires" (1966) 29 M.L.R. 673. 3 ss. 19 and 20 of the uniform companies legislation. This legislation which is uniform in many respects was introduced into the various states and territories within a short period during and after 1961. It is convenient to refer to the various legislation as the uniform Companies Acts. See...
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