The doctrine of ultra vires, derived from Latin meaning "beyond the powers," is a fundamental principle in corporate law. It states that any act or contract made by a company that exceeds the powers granted to it by its constitution (memorandum of association) is void and not legally binding on the company. Essentially, it limits a company's actions to those specifically authorized by its founding documents and relevant laws.
Key aspects of the doctrine:
Scope of Authority:
Companies are created with specific powers and objectives outlined in their memorandum of association. The doctrine ensures that companies operate within these defined boundaries.
Protection of Stakeholders:
The doctrine protects shareholders and creditors by preventing the company from engaging in activities outside its authorized scope. This safeguards their investments and ensures that company funds are used for the intended purposes.
Void Contracts:
Any contract or action deemed ultra vires (beyond the company's powers) is generally considered void and unenforceable. This means it cannot be legally enforced against the company.
Examples:
Examples of ultra vires acts include using company funds for purposes not specified in the memorandum, engaging in trades different from those authorized, or making investments not permitted by the company's charter.
Exceptions:
While the doctrine generally voids ultra vires acts, some jurisdictions and situations may recognize exceptions, such as where shareholders have ratified the act or where the rights of third parties are involved.

The doctrine of ultra vires, derived from Latin meaning "beyond the powers," is a fundamental principle in corporate law that dictates that any action or transaction conducted by a company outside the scope of its defined objectives and powers, as stated in its constitution or charter, is considered void and unenforceable. This doctrine primarily serves to protect shareholders and creditors by ensuring that a company's activities remain within the boundaries of its authorized powers.