The Doctrine of Ultra Vires Analytical Essay by nikki77

The Doctrine of Ultra Vires
A company law paper addressing the protection offered by the doctrine of ultra vires to shareholders and creditors.
# 149068 | 3,098 words | 29 sources | MLA | 2011 | IE
Published on Nov 22, 2011 in Law (Company)

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This paper answers the question as to whether the doctrine of ultra vires has in fact acted to the detriment of the shareholders and creditors it initially aimed to protect. The paper takes a chronological approach, concentrating firstly on the origins of the doctrine and then following the changes made to it by the judiciary and through legislative intervention. The paper reaches the conclusion that the doctrine has been misapplied and misused from its very conception and no longer holds any benefit for shareholders or creditors.

The Origins and Purpose of the Doctrine of Ultra Vires
Towards a Less Restrictive Approach
Rethinking the Construction of Objects Clauses
Ultra Vires and the Equitable Doctrine of Constructive Notice
Legislative Intervention
The Proposed Abolition of the Ultra Vires Doctrine

From the Paper:

"The ultra vires rule was one of judicial law-making, developed at a time when there was much distrust of companies and was predicated on the notion that shareholders and creditors needed protection from "managerial overreaching" , namely the misappropriation of investment or credit from said parties into funding ultra vires activities. Though its origins can be traced back as far as the early 1700s , the earliest case to deal with doctrine as it exists in relation to modern registered companies is Ashbury Railway Carriage Company v Riche . The plaintiff company, whose stated object was the manufacture and sale of railway carriages and rolling stock, entered into a contract with the defendant to finance him in the construction of a railway in Belgium. The contract was later repudiated and Ashbury sued for damages. The defendants contended that the agreement was ultra vires and therefore void ab initio. The court held that as a statutory company, established under the Joint Stock Companies Act 1862, it had limited contractual capacity and that this particular contract was ultra vires. This was predicated on the notion that such statutory companies, being formed by the state using state funds, were generally quite powerful and so the courts imposed the ultra vires rule in order to redress of the imbalance of power between the company and the individuals dealing with them."

Sample of Sources Used:

  • Deirdre Ahern, "Unlimited corporate capacity--Plotting the slow demise of ultra vires" (2004) 11(2) CLP 27
  • Jack Anderson, "The Evolution of the Ultra Vires Rule in Irish Company Law", (2003) 38 Irish Jurist 263
  • Howard Linnane, "Corporate Capacity and Ostensible Authority and their "Inextricable" Entwinement on Display" (2000) 7(2) CLP 37
  • " " "The Powers of Statutory Corporations" (1990) 8 ILT 144
  • Lyndon MacCann, "The Capacity of the Company - Part I" (1992) 10 ILT 79

Cite this Analytical Essay:

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