The company Act requires that the Memorandum of Association of every company must state the object of the company. The object clause must determine the boundaries and must identify the object in such plain and unambiguous manner so that the reader can identify the field of industry within which corporate activities are to be confined. The company must bind itself to work within the framework of those object as stated in its memorandum of association and to no other. The activities which are not expressly or impliedly authorized by the Memorandum of Association are ultra vires the company.
Ultra vires is the combination of two words and they are ‘ultra’ means beyond and ‘vires’ means power. An act will be said to be Ultra vires, when it is performed which though legal in itself, is not permitted by the objects clause in the Memorandum of Association or the statute. These types of acts are void and they cannot be ratified even by unanimous resolution of all the shareholders. Ultra vires act may be categorized under the following three heads:-
- Acts ultra vires the director:- These acts are out of the scope of the direction of the company. They are not totally void or inoperative. They can be ratified by the shareholders in a general Meeting.
- Acts ultra vires the Articles of association of the company: The acts will be ultra vires if they are beyond the powers of the company given to its by its Articles of association. They are also not void and inoperative. They can also be ratified by the company by altering the articles through a special resolution.
- Acts ultra vires the memorandum of association of the company: These acts are beyond the powers of the company, so called. “Ultra vires the company”. They aer wholly void, inoperative and cannot be ratified by whole body of the shareholders.