Business

THE COMMON LAW DOCTRINE OF ULTRAVIRES HAS NO PLACE IN MALAYSIA IN VIEW OF THEPROVISIONS OF THE COMPANIES ACT 1965. CRITICALLY CONSIDER THE ACCURACY OF THE ABOVE STATEMENT.

According to West's Encyclopaedia of American Law, doctrine of ultra vires is that if a corporation enters into a contract that is beyond the scope of its corporate powers, the contract is illegal. An ultra vires act is one beyond the purposes or powers of a corporation. It is also a decision which is beyond the powers or authority of the person or organization which took it. According to the case of Rolled Steel Products (Holdings) Ltd v British Steel Corp, whereby in this case it stated that two senses which must be distinguished are first ‘nullity’ where company, being an artificial person, has no capacity to do anything outside the objects specified in its memorandum of association.

If the transaction is outside the objects, in law it is wholly void and secondly ‘wrongful exercise of power’ where a company makes a transaction which was within its objects, but should not have been made. There are many references that can be found to define what are ultra vires transactions or doctrine of ultra vires. Literally translated from Latin words, ultra is outside or beyond whereas vires is powers. Thus ultra vires is combined to bring the meaning of beyond the powers.

According to West's Encyclopaedia of American Law, doctrine of ultra vires is that if a corporation enters into a contract that is beyond the scope of its corporate powers, the contract is illegal. An ultra vires act is one beyond the purposes or powers of a corporation. It is also a decision which is beyond the powers or authority of the person or organization which took it.

The doctrine of ultra vires is a most powerful weapon to keep private corporations within their legitimate spheres and to punish them for violations of their corporate charters, and it probably is not invoked too often but to place that power in the...