WS3: Ultra Vires Flashcards
Pre CA 2006, how was the objects of a company discovered?
Objects clause in the memorandum
CA 2006 - objects are unrestricted
What is the doctrine of ultra vires?
Where a company acts outside its given powers - held void
What is the doctrine of constructive notice?
Anyone dealing with registered companies is deemed to have notice of the contents of their public documents e.g. memorandum and articles in this case.
How has ultra vires been reformed?
Removal of the doctrine of constructive notice - in CA 2006 it is enshrined that the validity of an act done by a company cannot be questioned on the grounds of lack of capacity.
No objects clause needed.
How are pre CA 2006 companies with objects clauses treated?
The objects clause is treated as if it is a provision of the articles, and binds the company unless altered by special resolution.
Adopting new articles treats the objects clause as being removed.
What did ordinary trading companies registered between 1991 and 2009 say in the memorandum to keep objects open?
“General commercial company”
What is the law of agency?
An agent is appointed by a principal to act on their behalf.
An agent contracts on the principal’s behalf and the contract will be entered into between principal and 3rd party, not agent.
What types of authority may an agent have?
Actual - Express or Implied
Deemed - Statute
Common Law - Ostensible authority, or indoor management rule
What is actual authority?
Express actual Authority that has actually been conferred on them by the principal e.g. articles give the board of directors authority to manage the business of the company
When can implied actual authority arise?
Appointment to a specific role in the company e.g. appointment to the role of Managing Director
This means those ordinarily exercisable by a managing director in this position, subject to express agreements.
A course of dealing
When a director/agent continually enters into specific transactions and the board either acquiesces or agrees.
How is actual implied authority different to ostensible authority?
implied actual - only the relationship between principal and agent matters - no 3rd party perception issues.
What are the three categories of deemed authority?
Statutory under s40 CA
Deemed at common law - ostensible / apparent authority
Deemed at common law - indoor management / Turquand’s case
What is the implication of S40?
It protects 3rd parties where there are restrictions on the power of company’s agents to bind the company in constitution.
3rd party who deals with company in good faith can assume directors’ powers are free of constitutional limitations.
Includes even when specific shareholder / board approval is required.
What is the threshold of bad faith in s40?
Assumed to be acting in good faith unless the contrary is proved
Does s40 protect directors?
No - only 3rd parties. company can sue director.
