The fact that an act is outside the capacity of the company may also be asserted or relied upon in proceedings against the company’s directors who, in causing the company to enter into an ultra vires transaction, would be likely to be in breach of their own directors’ duties.
CONCLUSION
Where outsiders are concerned, the legislative provisions are to be welcomed as they go some way towards moderating the drastic consequences of the ultra vires doctrine. Nevertheless, the doctrine has not been fully abolished. In the case of companies that retain a statement of objects in their memorandum, the doctrine continues to apply, albeit reincarnated as a mechanism for internal control, ie in the form of restrictions on the directors’ exercise of powers. In this regard, an understanding of the doctrine remains useful.
Pearlie Koh Ming Choo is associate professor at Singapore Management University
References
1. Ashbury Railway v Riche (1875) LR 7 HL 653, 671.
2. Ashbury Railway v Riche (1875) LR 7 HL 653, 672.
3. (1880) 5 App Cas 473.
4. Ibid, 478.
5. [1986] Ch 246.
6. Rolled Steel Products (Holdings) Ltd v British Steel Corp [1982] Ch 478, 497 (at first instance).
7. [1994] 2 SLR 35.
Last updated: 17 Feb 2016
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