Historically, companies were regarded as having limited legal capacity because they were artificial creations, rather than natural persons. Therefore, in the eyes of the law, a company was seen as capable of engaging only on those businesses and activities for which it had been established and which were identified in its objects clause.
By restricting the company's activities only to those matters set out in its objects, the shareholders and creditors could be fully informed about the scope of the company's commercial potential. Ultra vires means "beyond the power".
An ultra vires act is beyond the legal power of the holder of the power, and therefore invalid. If a company went beyond the powers stated in its objects clause, it was acting ultra vires. (Business and Corporations Law, paragraph 9.19 at page 504.)
Explain the effect on the doctrine of ultra vires of the changes made to Corporations Law from 1 July 1998. Do you agree that the doctrine of ultra vires has been substantially abolished?
Essay Outline for Students
Please note: This is a brief outline to assist students with what your essays should discuss. You are required to do your own research, use a number of primary sources and cite the relevant cases/legislation where appropriate. The prescribed text does not provide sufficient information on this topic to satisfactorily complete the essay.
The information provided is not exhaustive. It is merely intended to provide some assistance, there are other cases and information students may include in their essays. As a minimum, your essay should:
-(IN THE INTRODUCTION PART SHOULD BE DISCUSSED):-
History, Aims of the essay, our views, Briefly explain about the essay and Quote.
• Define and explain the doctrine of ultra vires.
• Discuss the doctrine as it originally operated under common law. See;Ashbury Carriage & Iron Co. v Riche (1875) - other cases may also be cited.
• Discuss how ultra vires was codified under the Corporations Act - what sections were relevant (e.g., s160 inter alia)
• Discuss the amendments to the Corporations Act from July 1 1998 - Which sections were repealed? (See e.g., s124(2), s125(1 and
2) What was the effect of the amendments?
• Defineultra vires in the narrow/broad sense. What do these terms mean? (e.g., corporate capacity, members and directors powers)
• Discuss whether the doctrine has been abolished entirely or substantially with reference to relevant cases. Cases students may refer to include: News Ltd v Australian Rugby Football League (1996), ANZ Executors and Trustee Co Ltd V Qintex Australia Pty Ltd (1990), Gambotto v WCP Ltd, Re Caratti Holding Co. Pty Ltd
• Conclude by summarising points raised in body of question. Based upon the changes to the July 1 1998 amendments to the Corporations Act and its application in various cases, does the doctrine still apply in Australia?