Implication of Ultra Vires Acts:
The effect of the ultravires transactions are discussed under the following heads.
1.      Injuction: In case a company is going to undertake an ultravires act, any member of the company can get an order of unjuction from the court to restrain the company for going ahead with the ultravires acts.
2.      Personal liability of the directors: it is one of the duties of directors to see that the corporate money is used for the legitimate business of the company and not otherwise. The directors shall be personally liable to make good the amount, if any capita is unlawfully disbursed. If the person receiving the money known that he is receiving the payment of any ultravires act, then he should return the money back to the directors.
3.      Void ab initio: The Ultravires acts by nature are null and void and the company is not bound by these acts. The company cannot sue or be sued upon such acts.
4.      Ultravires acquired property: A company can protect its property acquired by the ultravires were cut and it has no power in the memorandum to put up the wires, it was held entitled to recover the damages for injury.
5.      Ultravires borrowing: If a person lends money to a company and the company either has no borrowing power or had crossed the limit or the borrowing is for the purpose which is ultravires, then the contract will be declared to be void. For recovery of the lent money no action can be taken.
0 Comments