After 1960, the courts allowed the directors of the corporation, as the competent authority, to decide whether the corporation`s act was ultra vires or not. The liability of the corporation was undoubtedly in the possession of its director, and it was the duty of a corporation to safeguard the interests of shareholders. It could therefore be concluded that such responsibility had been conferred on the manager in order to increase the profitability of the company. And the fundamental intention was to save the noble and enormous enterprise from an outdated legal principle, so that in this way the doctrine of ultra vires was overturned another time by the court. To that end, the practical meaning of ultra vires had been lost. The exemplary objectives mentioned in the following company laws were essentially designed by the authors of corporate objects. As a result, they have been called “inclusive list syndromes.” Therefore, it was an abundance of objects and the power generated by the intellect or imagination of the consultants. However, in response to the inclusive list syndrome, one rule applied by the courts was the “rule of interpretation ejusdem generis”. In the Court`s view, that principle was liable to limit the wording of the purpose clause. Therefore, it was imperative that the object be interpreted in relation to the main social object of society, the so-called “substratum rule”, rather than preserving its factual literal meaning. Similarly, it could be seen in Ashbury, when the objects allowed the company to work as a “general contractor”, according to the principle of ejusdem generis, the main commercial object of the company was mechanical engineering. In the landmark case of Anisminic v. Foreign Compensation Commission,[12] Lord Reid is accredited to formulate the ultra vires doctrine.
However, ultra vires, as well as impropriety, were mentioned much earlier by Lord Russell in the famous Kruse v Johnson case,[13] which involved challenging laws and other rules. Anisminic is best known for not depriving the courts of their jurisdiction to overturn a decision, even though a law expressly prohibits the decision from being subject to judicial review. Other cases such as Bromley LBC v. Greater London Council[14] and Council of Civil Service Unions v. Minister of the Civil Service[15] have tried to refine the doctrine. It should be noted that the court had limited the scope of the amendment to the company`s ownership clause. The court had limited the Company`s ability to change or modify its purpose clause in circumstances where the Company was expressly or implicitly authorized. This restriction could accordingly reduce the risk to the company`s creditors and investors, which depends on purpose clauses to estimate or measure the risk associated with any type of potential investment. The Ashbury courts considered the contract ultra vires.
The Ashbury courts have described the ultra vires contract as an abuse of a company`s legal capacity. Charter companies and registered companies should be deterred from such abuses. A public interest in saving shareholders and creditors was also raised by the Ashbury Court [7]. Under constitutional law, particularly in Canada and the United States, constitutions confer various powers on federal, provincial or state governments. To go beyond these powers would be ultra vires; For example, although the Court did not use this term to amend a federal statute in United States v. Lopez on the grounds that it exceeded the constitutional authority of Congress, the Supreme Court still declared the law ultra vires. [10] Ultra vires is defined as anything that is “beyond power.” However, in company law, there are several connotations depending on the circumstances. The deed of a corporation is considered ultra vires for the articles or articles of association, or it may also be ultra vires of the extent of the powers of the officers of the corporation. These distinctions depend on the nature and scope of the ultra vires action. The action taken by ultra vires on the memorandum will be completely null and void and there is no option for ratification of the memorandum.
It will not be ratified, even if the company`s shareholders have tried or accepted it. However, the measure, which is ultra vires for the articles of association and exceeds the power of the official of the company, may be ratified by the company. To this end, it is necessary to mention the historical remark of Lord Cranworth in Eastern Counties Railway v Hawkes [1]. This effect was the result of Ashbury`s decision. However, unsecured creditors did not have the remedy of the injunction; Secured creditors could benefit from this remedy. Cross v Imperial Continental Gas Association can be cited in this context [8]. The ultra vires transaction, share or transaction may be cancelled at the request of the shareholder. The question arose as to whether a third party could invoke the ultra vires principle against an undertaking.
Bell Houses Ltd v. City Wall Properties Ltd [9] confirmed that a third party had the right to invoke the ultra vires principle against a transaction. Shareholders could request the dissolution of the company if the company`s main objectives had failed [10]. The liquidation of Lawrence v. West Somerset Mineral Railway Co. could not be sued by the creditor [11]. The unsecured creditor was not protected by law. The reason was that there was a lack of legal knowledge and resources; No legal advice was available for the interpretation of the ownership clause. It is up to the company to choose whether or not to limit the scope of its purpose with regard to § 31. In Ceredigion Recycling v. Clifford Pope, the Court concluded that section 39 describes that the corporation`s act is not in question, even though the corporation`s purpose clause specifically limits the scope of the corporation`s legal capacity as defined in the corporation`s articles of association.
To this end, the effect of the ultra vires principle rests intact and intact. The directors of the Corporation are accountable to the shareholders for maintaining the Corporation`s commitment to restricted actions or objectives. In the event that the director of the company is involved in the restricted acts, he is liable to the shareholders, which is a violation of the legal obligation of the director`s powers. Cotman v Brougham [12] strongly criticized the approach of Principle Business Objects. The Court described this principle as a “lever of confusion”. In Re Haven Gold Mining Company [13], the court attempted to challenge the syndrome by requiring that the memorandum necessarily have as its primary purpose. The Court further stated that the other general objectives should be based on this main subject set out in the memorandum. This approach corresponded well to the Ashbury substrate rule. However, the verdict of the Attorney General v. Great Eastern Company rendered these approaches superfluous.
In the Attorney General`s Office, the Court held that the principle of ultra vires”. be reasonably understood and applied and that anything that can reasonably be considered incidental or consequential to the things authorized by Parliament should not be considered ultra vires by judicial interpretation” [14]. The Companies Act 2006 (`the 2006 Act`) is a fundamental document. However, the 2006 law made several important changes to the ultra-vire doctrine. Article 39 stipulates that none of the shares of companies may be questioned independently of anything in the incorporation of that company. The 2006 Act promotes unlimited objectives and, in any event, where the purpose is limited, the power of directors is limited accordingly. Article 171 regulates the basic and special duties of directors, which must be in accordance with the articles of association of the company.
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