Ultra Vires Acts
Candlefocus EditorThe term originated from the Latin “beyond the powers” and was first used in English law in the late 19th century. In the United States, ultra vires acts are prohibited by the Model Business Corporation Act, which requires corporations to act within their express or implied powers.
In the business context, an ultra vires act is an action that falls outside of the scope of the company’s authority or purpose. For example, a business that is limited to selling goods may not enter into a contract involving the sale of securities. This act may not only be treated as ultra vires, but may also be subject to civil, financial and criminal penalties.
In corporate law, an ultra vires act is one that fails to comply with the act’s authorised purposes and can usually be annulled or treated as void. This may relate to a breach of articles of association, a decision taken outside of the scope of the company’s objects, or a decision contrary to the scope of delegated powers.
Ultra vires acts may also be referred to as acts of ultra vires and can also include decisions that are taken outside of a certain statutory or delegated power. The concept of ultra vires also applies to fraudulent acts undertaken by a business, or activities over which the business does not have legal authority to act.
The purpose of prohibiting ultra vires acts is to protect a company’s corporate interests. If a business engages in an ultra vires act, it will be seen as separate from the main business and could be held financially responsible for any losses that result. Additionally, it may render any contract invalid or void, as it was not made within the bounds of the company’s authorised purpose.
In most cases, those found guilty of ultra vires acts must pay restitution, especially if the company was damages due to the act. Liability may also extend to those who controlled or authorised the act, as they could be found culpable if they failed to act within the scope of their delegated powers.
In summary, an ultra vires act is an illegal act that goes beyond the powers granted to an individual or organization. Companies should ensure they are aware of the limitations of their powers to avoid engaging in an ultra vires act, but if an act of this nature transpires, those involved should seek legal advice.