The doctrine of Ultra Vires
The Doctrine of Ultra Vires is a fundamental rule of Company Law. The expression “ultra vires” consists of two words: ‘ultra’ and ‘vires’. ‘Ultra’ means beyond and ‘Vires’ means powers. It was observed by Lord Selbourne that the memorandum is the company’s fundamental and unalterable law. The memorandum of association determines the constitution and the powers of the company. A company is incorporated only for the objects and purposes expressed in the memorandum.
Traditionally, each power of the company had to be enumerated, which resulted in detailed statements as to the powers of the company. Any act purported to be done by the company which is beyond the scope of the functions of the company or is beyond the power of the company as laid down, in the memorandum, is called ultra vires. Sometimes the expression ultra vires are used to describe the situation when the directors of a company have exceeded the powers delegated to them. In legal terms, it is applicable only to the acts done in excess of the legal powers of the doers. This rule is meant to protect the interests of the shareholders and creditors of the company.